The Markets – May 23, 2024

Reading the economic tea leaves.

Tasseography practitioners read tea leaves to forecast the future. Some economic data serve a similar purpose. Policymakers, central bankers, economists, and investors look at leading economic indicators to forecast where the economy may be headed. Classic leading indicators include:

Consumer confidence. Consumer spending is the largest contributor to economic growth in the United States. When consumers feel confident about their finances, the economy may continue to grow, and vice versa.

The slope of the yield curve. When yields for short-term U.S. Treasuries are higher than yields for long-term U.S. Treasuries, then a recession may be ahead. “Yield curve inversions have preceded each of the last eight recessions,” reported the Federal Reserve Bank of Cleveland.

Stock market performance. Since investors make decisions based on how they believe the earnings of companies and the value of companies’ stocks will change over time, a rising or falling stock market is considered to offer insight to where the economy may be headed. 

“The leading indicators for the U.S. economy fell in April for the second month in a row…The leading index declined mainly because of weaker business orders, fewer permits to build new homes and a decline in stock prices last month. Stocks have since rebounded, however, to fresh record highs,” reported Jeffry Bartash of MarketWatch. “The economy slowed in the first quarter after heady growth in the second half of 2023. It’s unlikely to speed up much until inflation tapers off and the Federal Reserve cuts interest rates.”

Some analysts believe rate cuts are still on the table for 2024, reported Sam Meredith of CNBC. Last week, the Consumer Price Index showed headline inflation (which measures price changes for a fixed basket of goods) and core inflation (which removes food and energy from the basket) both moved lower from March to April.

Investors found a lot to like in the inflation data. U.S. stocks finished the week higher with the Dow Jones Industrial Average closing above 40,000. Yields on most maturities of U.S. Treasuries moved lower over the week, lifting bond prices.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

WHICH STATE LOOKS THE MOST LIKE THE UNITED STATES? Fifty states joined the Union from 1787 through 1959. Every one of them has a distinct history and culture. States’ names originated from Latin, English, Spanish, French, Polynesian, Algonquian, Siouan, Iroquoian, Uto-Aztecan, and other languages. In Alabama, there are deep sea fishing rodeos and in Arizona there are sidewalk egg-frying contests. In Georgia, they like salted peanuts in cola, and in Michigan they call soda “pop.” Nebraska cheers for the Cornhuskers, while Oregon flies with the Ducks.

There are a lot of differences between U.S. states, but which state is most like the United States? That’s the question Lenny Bronner and Andrew Van Dam of The Washington Post wanted to answer. Bronner crunched U.S. Census data to create indices that compare U.S. states to one another and to the nation. Some of their findings can be found in this quiz.

1. Which state most closely resembles the United States when it comes to income? (Hint: Its state flower is the violet.)
a. Arizona
b. Illinois
c. Georgia
d. Nevada

2. Which state is most like the United States when it comes to residents’ educational achievement? (Hint: It has the oldest state park in the nation.)
a. Rhode Island
b. West Virginia
c. Georgia
d. Texas

3. Which state most closely mirrors the country when it comes to employment? (Hint: Its known for a tasty sandwich.)
a. Pennsylvania
b. Utah
c. Mississippi
d. Ohio

4. Bronner constructed a similarity index using 30 variables to predict which states are likely to vote similarly. Which states are the closest match to one another? (Hint: You may have a hard time believing it.)
a. Arkansas – New Mexico
b. California – Texas
c. Florida – Wisconsin
d. New Hampshire – Ohio

Financial plans are a lot like states. They reflect the unique characteristics and needs of individuals and families. If you have any questions about whether you are on track to achieve your financial goals, get in touch.

Answers: 1) b; 2) c; 3) a; 4) b

Weekly Focus – Think About It 

“A nation’s culture resides in the hearts and in the soul of its people.”

—Mahatma Gandhi, activist

Best regards,

Daniel J. Murphy, CFP®
Murphy Wealth Management Group
60 Merritt Blvd., Suite 106
Fishkill, NY 12524

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