Trend watch
The impact from the recent hurricanes continues to ripple through the activity-based data (slides 5 and 6). Hotel occupancy remains robust, at 70.1% last week, hovering near the highest October reading since 2019. Occupancy in Tampa was 83.7%, likely bolstered by people impacted by Hurricane Helene and Milton.
Furthermore, air passenger counts remain robust at just over 18 million for the prior 7 days. The average daily traffic topped 2.6 million this past Sunday and Monday, which is the highest level after Labor Day ever and is highly unusual.
What’s new this week
- Existing home sales and prices fell in September (slide 7).
- New home sales jumped in September – despite higher prices (slide 8).
- SPG’s manufacturing and services indices continue telling different stories (slide 9).
- CEOs temper outlook, views for sales and hiring, but see more investment (slide 10).
- Consumers still heading to the movies for blockbusters (slide 11).
- Leading indicators continue showing weakness (slide 12).
Our take
Incoming economic data remains mixed, although largely upbeat. On the positive side were new home sales, the SPG services survey, and back-to-back drops in weekly jobless claims that almost fully returned to the pre-hurricane levels. Conversely, manufacturing remains sluggish, which has been exacerbated by ongoing labor strikes in the aircraft industry.
Its also important to note that existing home sales correspond to closings, while new sales are counted when the contract is signed, and a deposit is given. Hence, existing sales lag by three to six weeks. Accordingly, existing sales don’t yet reflect the sharp decline in mortgage rates that occurred in September following the Federal Reserve’s September rate cut, but the uptick in new sales do. (Mortgage rates subsequently jumped in October along with yields and other rates.)
As we mentioned previously, the election distraction is very real. It’s been reflected in the sour consumer sentiment readings and, similarly, appears to be impacting the CEO outlook.
Indeed, the elections are an important factor and rightly cause uncertainty, especially given the policy differences each side might undertake. But they are just that – a factor, not the only factor.
Our mantra has long been that “politics and portfolios don’t mix” – meaning that making investment decisions based solely on politics doesn’t typical help portfolio returns, which is supported by the historical data.
That is also true for economic outlooks as growth is largely driven by long-term trends such as demographics, population and labor force growth, productivity, capital investment and other non-political factors. Of course, tax policies also have an outsized influence on economic growth but aren’t the only factor.
Thus, while many voters are pinning their economic hopes for providing economic bliss on one side or the other, the reality is much more nuanced and is probably somewhere in between. Furthermore, the path of future U.S. economic growth is much more likely to be determined by the non-political factors than most voters care to admit. In fact, both sides working together to craft solutions for big issues – such as reducing federal budget deficits, whittling down the national debt, and ensuring the sustainability of programs like social security and Medicare – would be more beneficial for America’s longer-term prosperity.
Bottom line
The U.S. economy remains resilient, albeit with uneven growth. It’s certainly not weak, especially when compared to pre-pandemic figures. While the Federal Reserve has begun lowering interest rates to support economic growth, the process of normalizing rates has just started and will take time to unfold.
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