Well, it may be fair to say we are in the slowdown that we mentioned in our last newsletter. Over the past month, we have seen most markets, worldwide, experience a slowdown in growth, leading to negative returns in their respective indices. However, if we are only looking at index performance, you would be surprised to learn that earnings season is looking better than you might think. According to John Hancock’s Market Intelligence Weekly, 75% of the S&P 500 companies have reported with a 78% beat rate on earnings but only 59% on revenue.
Last week, the Fed announced that they would not be reducing rates this month, but their tone seemed to indicate the possibility of a rate cut in the near future and another later this year. This is in response to the recent softening of the economy–home sales, new construction, and manufacturing indexes have all shown a decline. The July jobs report also indicated a slight uptick in unemployment to 4.3%. All of this may sound very “doom and gloom”, however, downturns are part of a healthy economy, and your Purus Investment Committee, as it has been for decades, is poised to act based on whichever way the markets move. A long-term correction would warrant a more defensive posture, but should it be the “slight slowdown” we have hoped for, our equity watchlist is full of great opportunities for our long-term investment plans.
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“Improving news on the inflation front will likely spur the Fed to kick off rate cuts earlier than we previously projected. This should begin to lift the pressure from the US economy and keep a soft landing as the most likely scenario.”
“Despite a higher-than-expected payroll job gain, the June employment report was on the soft side, with downward revisions to payroll gains from prior months, a drop in temporary employment and only modest gains in wages. However, the weakest aspect of the report was the unemployment rate, which edged up from 4.0% to 4.1%.”
“After accelerating in the back half of 2023, the US economy has begun to slow down. Over the short term there are a number of potential headwinds: high policy rates, cost pressures and geopolitical uncertainty. All of this weighs on both corporate and consumer confidence.”
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