The Pulse on the Economy and Capital Markets: July 2024

To Summarize: The stock and bond markets rallied with a reversal in market leadership. Consumer spending continues to surprise, despite stresses on some segments. Real-time inflation data points towards the Federal Reserve (Fed) reducing interest rates. We unpack this and more in the July edition of The Pulse.

In the Markets: The third quarter kicked off with a strong start across the stock and bond markets. Smaller companies have greatly outperformed the largest tech-driven companies. While corporate earnings growth has powered markets in July, the anticipated interest rate reductions by the Fed has favored smaller companies.

Surprise Spending by Consumers: We have previously discussed the divide in consumer spending and the stresses of those with lower incomes. Yet, across the economy, June was one of the strongest spending months in a year in a half. One of the drivers of this recent strength in spending is that consumer credit debt as a percent of disposable income is declining, which has given consumers spending capacity.

Lower Inflation Data Excites Investors: Real-time inflation data appears to give the Fed reasons to be more aggressive with rate reductions. Rates are declining more rapidly in markets that experienced the fasted demand growth. Investors are now anticipating the first rate cut to occur at the Fed’s September meeting.

Top Headlines: We’re reading about how ocean freight rates from Asia are spiking ahead of the holiday season, why Google’s $23 billion attempted acquisition of cybersecurity start-up Wiz was a potential game changer, Blackstone’s investment activity picks up, and AI is poised to drive 160% increase in power demand.

Related resources:

• Ahead of holiday season, ocean freight rates from Asia are once again spiking
• Why Google’s $23 billion attempted acquisition of cybersecurity start-up Wiz is a
  potential game changer
• Blackstone’s investment activity sees biggest pick up in two years
• How AI is poised to drive 160% increase in power demand – perspective by Goldman
  Sachs