Weekly update: Lower rates, resilient consumers

Presented by Marc Aarons

Hope you are doing well! Last week delivered a mix of steady progress and fresh challenges for the U.S. economy. The Federal Reserve’s dovish policy move signaled a shift toward supporting growth as signs of cooling emerge in both employment and consumer spending.

 

Though inflation remains a key concern, the road ahead will largely depend on upcoming economic data. Here are a few important developments to note:

 

Stock Index Performance

• The S&P 500 gained 1.22%.
• The Nasdaq 100 jumped 2.22%.
• The Dow Jones Industrial Average rose 1.05%.

Federal Reserve Lowers Rate

• The Fed lowered the interest rate it charges banks by 25 basis points to the 4.00%-4.25% range, in what Federal Reserve Chair Jerome Powell characterized as a “risk management” decision amid shifting economic conditions.
• Fed policymakers are weighing conflicting signals. The latest inflation reading climbed to 2.9% year-over-year — the highest since January — even as the labor market shows clear signs of weakening, complicating future rate decisions.
• Officials are currently split on future rate cuts. Fed projections show most members anticipate two additional reductions by year-end, while a minority expect just one or none, depending on inflation and jobs data.

Consumer Spending

• U.S. retail sales rose 0.6% in August, the third straight monthly gain and well above the 0.2% forecast, with strength across categories. The control group, a key input for GDP, climbed 0.7%, signaling solid momentum for the current quarter.
• Gains were partly price-driven — gasoline, food, and apparel costs all rose — leaving “real” growth more modest. Still, discretionary categories like online shopping (+2.0%) and clothing (+1.0%) outperformed.
• The latest retail sales report underscores resilient U.S. spending, but growth is increasingly concentrated among higher-income households, raising concerns that inflation, weaker labor gains, and softer sentiment could erode momentum into year-end.

The Week Ahead

• Investors are bracing for the Personal Consumption Expenditures (PCE) price index, due September 26th. The Fed’s preferred inflation gauge is expected to show inflation still running above target and could shape expectations for rate cuts later this year. A higher-than-expected reading could upend bets on policy easing and jolt stocks and bonds.
• Also watch for U.S. housing data (new home sales and pending sales, September 24th-25th) as a gauge of household strength; consumer sentiment updates (Conference Board and University of Michigan, September 23rd and 26th) for spending momentum; and weekly jobless claims (September 25th) to track labor resilience.

That’s a wrap for this week. The bigger picture still matters most, and I’m here whenever you’d like to review your strategy or discuss next steps.

 

September has a reputation for testing investors, so some turbulence shouldn’t come as a surprise. Staying nimble around data releases and Fed commentary — while keeping a steady focus on long-term goals — is a strong choice. As always, if you have questions or concerns, don’t hesitate to reach out!

 

Please don’t hesitate to reach out with any questions or concerns.

Marc Aarons may be reached at 714-887-8000 or Email Marc

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