Present and Future Wisdom

Markets shot up this week after the Fed’s half percentage point rate cut fueled economic optimism. The S&P 500 sector lead gainers were Energy and Communication Services, while the laggards were Consumer Staples and Real Estate. The Fed and current economic data were the biggest news, but there also is an interesting sociological trend within our economy to note: a changing trend for college enrollment.

Weekly Performance

Data Source: Factset®        Performance Period:      9/16/2024  to 9/20/2024

Overshadowing the economic calendar was the much-anticipated FOMC interest rate decision on Wednesday. The Federal Reserve cut interest rates by half a percentage point. This was the first time since March of 2020 that the Fed lowered rates, and time will tell if this easing of monetary policy was a wise move for the long-term health of the economy. Outside of the Fed, August retail sales came in stronger than expected, rising 0.1% (rather than the expected 0.2% decrease). Industrial production and business inventories also ticked up higher than anticipated. The housing market index improved when it bumped up to 41 from the prior reading of 39, indicating increased homebuilder optimism. Building permits and housing starts last month beat forecasts, and July’s readings after a drop in mortgage rates. However, the increased optimism has yet to translate into more robust sales, as existing home sales lagged behind expectations for August.

This week welcomes more key economic data. Services and manufacturing PMI reveal the vigor of both industries. New home sales and pending home sales will provide greater insight into the housing market. GDP comes on Thursday and will signal the overall health of the economy. Personal income, spending, and personal consumption expenditures will provide further insight into affordability and inflation.

Rate cuts can have rippling impacts throughout the economy in housing, hiring, and savings accounts. Considering the impact that small changes can have more broadly, it is interesting to consider a particular trend within post-secondary education. College enrollment has been trending downward since 2010, with its most significant dip during the pandemic in 2021. While there are multiple reasons for this occurrence, the primary explanation may lie in the population count. With the national birth rate declining by nearly 23% since the Great Recession, there is naturally a drop in the number of graduating high school seniors available to attend college. Couple that with the increased cost of tuition and academia’s ability to attract new students is one of its weakest points, historically.  The potential “breaking point” may have been the pandemic, as many prospective students elected to “tap the brakes” on college plans and postpone or reconsider them altogether. Post-secondary institutions have already begun to respond to this troubling trend by taking strategic action like doing away with certain courses, offering more online classes, providing dual enrollment for high school students, and merging with other colleges. With education being an integral component of an advanced economy, it will be interesting to observe the broad implications of this trend and how these institutions continue to adapt. “For the protection of wisdom is like the protection of money, and the advantage of knowledge is that wisdom preserves the life of him who has it” (Ecclesiastes 7:12).

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

 Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights. Securities offered through American Portfolios Financial Services, Inc. of Holbrook, New York, 631.439.4600,(APFS), member FINRA, SIPC.  Faithward Advisors is not owned or operated by APFS. Faithward Advisors offers Investment Advisory services through Ambassador Advisors, an SEC Registered Investment Advisor. Dream More, Plan More, Do More is a registered trademark of Faithward Advisors, LLC, Reg. U.S. Pat. & Tm. Off. Any opinions expressed in this forum are not the opinion or view of Faithward Advisors or American Portfolios Financial Services, Inc. (APFS). They have not been reviewed by either firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.