Market Recap 9/15/2023


The equity markets were modestly higher for the week but bonds slipped ahead of next week’s Fed meeting.   Nothing dramatic either way, though, and a host of economic and political news did little to move the needle much.  For example, the auto workers strike and a looming government shutdown were both greeted with a shrug of the shoulders by the markets.  

On the economic front, the main report for the week was August's inflation number. It was basically in-line with consensus, although inflation accelerated in August due to a jump in gasoline costs.  Specifically, the consumer-price index (CPI) rose 0.6% in August, a noticeably faster pace than in July.



Strip out food and energy, though, and prices rose were up a more modest 0.3%.  On an annual basis, prices overall were up 3.7% in August versus 3.2% in July. Annual core inflation edged lower to 4.3% in August from 4.7% the prior month.



So, a mixed picture.  Should we be worried that overall prices are rising again, or reassured that core prices continue to decline?  The market isn’t sure, hence the muted reaction by both bonds and stocks to the report.  


If you had to characterize the consensus view for the next few months, it’s that inflation should continue to drift lower simply because rental inflation is likely to moderate.   The bottom panel in the chart below from BCA captures this dynamic – shelter costs are falling and the full impact has yet to be felt in the inflation stats.



Of course, the wildcard is oil.  Both brent and WTI crude surpassed $90 a barrel this week.  


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And interestingly, the type of oil that Saudi Arabia sells surpassed $100.


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There’s certainly a geopolitical component to the recent increase in prices given moves by OPEC+.  But there’s also a supply piece. U.S. crude oil inventories are running at 40-year lows largely because the Strategic Petroleum Reserve has been run down.  



This doesn’t mean prices are going to continue to increase, but it does make the market more susceptible to shocks.  And if there is a risk to the relative sanguine outlook for inflation in the months to come, it could very well come from the oil market.  


(Other) Charts We Found Interesting


  1. A bullish economic chart - U.S. households cash balances remain elevated.  



  1. A bearish economic chart – it’s getting harder and harder to access credit.



  1. Another bullish chart – manufacturing spending in the U.S. is on a tear.



  1. This captures the valuation disparities between the largest of the large-cap stocks and the rest of the market.


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  1. Another Fed meeting next week – market is betting on no change in rates. 



  1. Fifteen years ago today Lehman Brothers failed. I wonder who bought the sign?


Lehman Brothers Collapse: Causes, Impact


  1. What it takes to feel wealthy in different U.S. cities. 




  1. This map shows the relative position of major European cities if they were suddenly moved to Texas. Depending on your point of view, it either shows that Texas is really big or Europe is very small.


Major European Cities On A Map Of Texas


Have a good weekend


Charles Blankley  


Charles Blankley
Chief Investment Officer
Gemmer Asset Management LLC

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