The Weekly Update 10/13/2023

68.30%

For those of you who have been reading these updates for years, you know that the above, 68.30% is the percentage of our entire economy derived from Personal Consumption Expenditures (PCE).  (Source: JP Morgan Guide to the Markets, 9-30-23). 

Thus, 68.30% of all the goods and services our economy creates, all $27 trillion of it, is consumed right here in the USA.  In the monthly update of The Seven Signs of a Changing Economy™, PCE is Sign #1 for the simple reason that it represents 68.30% of our economy.

PCE is the bullseye!  Arguably, you could simply track PCE to measure the health of our economy.

Those of us in the workforce need a job to create the money we pay tax on, spend, and save!  You could easily argue there can be no recession if people are earning money and then buying “Stuff”!

In the chart below, we collectively have never had this many people working and never had a higher household net worth.  Check it out!

So, we are quantifiably earning the money, but we are spending it?

YES!  Like it’s going out of style……no matter what your news source tells you, you will have a tough time getting to a recession when people are earning and spending at record levels. 

This is a chart of the “facts”, source cited, as always.

Notice the dotted lines are to adjust for the impact of inflation.  No matter which area of spending you choose to measure, with or without inflation, Personal Consumption Expenditures (PCE) rest at an all-time high.

No, the economic backdrop that Corporate America must operate in is not the same as market valuation volatility.  You may want to check your definition of volatility.   As I write this week’s update on October 11, 2023, the S&P 500 is trading at 4,367 close to the 4,325 on January 25, 2022, twenty months ago, and 4,356 on June 26, 2023.

In our industry we refer to that as trading in a box.  Values rarely drop down out of the box, instead they just drop. What happens much more often is the valuations break-out of the box to the upside.  It is more common to see large increases in value if the trade range in the box is over a long period of time, like the nearly two years noted above.

This is why we will continue to add lower risk, lower volatility, and best-of-class investments to our client family’s asset allocations. 

I’m interested in your thoughts, comments, and observations.  Feel welcome to call, email, or stop by the office and say Hi.

Respectfully,

James O. Lunney, CFP®

CERTIFIED FINANCIAL PLANNER™ Professional  

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.