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Weekly Market Recap: August 21, 2023

Weekly Market Recap: August 21, 2023

Posted August 21, 2023 at 10:15 am

J.P. Morgan Asset Management

The week in review

  • Retail sales: 0.7% m/m, 1.0% ex-autos
  • Industrial production: 1.0% m/m

The week ahead

  • New and existing home sales
  • Flash PMIs

Thought of the Week

Most forecasters entered this year expecting a recession, but recently, economic growth has actually reaccelerated. In fact, the Atlanta Fed GDPNow model estimates that the U.S. economy will grow at a 5.8% saar this quarter. If realized, this would mark the fifth consecutive quarter of at or above-trend growth, highlighting the resiliency of this economy despite tighter monetary policy. The current estimate increased from 4.1% last week, driven by upside surprises on retail sales, housing starts and industrial production this week.

Retail sales handily beat expectations, gaining 0.7% m/m and 1.0% ex-autos. While a 1.9% m/m increase in online sales contributed the most, gains were broad-based. Elsewhere, industrial production jumped by a stronger-than-expected 1.0% m/m due to strong auto production and sweltering temperatures driving up the demand for cooling. Manufacturing output also rose 0.5% m/m. However, excluding the sharp increase in motor vehicles and parts production, gains were a more modest 0.1%. Finally, the housing market showed continued signs of stabilization. Housing starts and permits rose by 3.9% and 0.1%, respectively, as gains in single-family more than offset declines in multi-family across both measures.

Importantly, 5.8% growth is not guaranteed. Since 2Q 2014 and excluding the onset of COVID, the GDPNow model has overestimated the final GDP print by an average of 0.8% at this point in previous quarters, and by 2.2% when the model was above 4%. Still, strong economic momentum suggests the U.S. should avoid a recession in 2023 and has helped push yields higher. However, risks remain for 2024 and unless robust growth can be sustained, yields may be near their peak. With the 10-year at 15-year highs, investors can add to duration and lock in attractive income, leaving them better positioned for when yields inevitably move lower.

Atlanta Fed GDPNow
chart of the week and thought of the week sources

Originally Posted August 21, 2023 – Weekly Market Recap

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Disclosure: J.P. Morgan Asset Management

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

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