Fourth Week of September 2023

THE WELL-TH NOTES
Weekly data-driven insights on the markets and economy

1. Da Bears

The S&P 500 fell -2.91% last week, marking three consecutive weeks of losses (along with the Chicago Bears) and reducing its year-to-date (ytd) return to 13.88% (it was up 20.65% ytd at its peak in July).[i] Bearish sentiment was likely driven by the Fed signaling higher-for-longer rates at its meeting last week. Its median projection for the fed funds rate at the end of next year rose to 5.1% from 4.6% in June.[ii]

2. Weaker Bonds

The 10-year Treasury yield reached 4.5% last week, the highest in nearly 16 years.[iii] Rising yields continue to hit tech stocks particularly hard (the Nasdaq’s ytd return has fallen to 27.0% from 37.8% in July) and weigh on fixed income returns. The Bloomberg U.S. Aggregate Bond Index, a broad mix of corporate, government and other bonds, is down -0.2% ytd after being up by as much as 4.2% in April.[iv]

3. The Fear Factor

After spending most of the summer in “greed” (or “extreme greed”) territory, the CNN Business Fear & Greed Index fell into “fear” territory last week for the first time since March, ending the week at 36 (its high this summer was 84). The index measures seven aspects of stock market behavior including market momentum, stock price strength and safe-haven demand.[v]

4. Boss Blues

As the Fed has raised interest rates, CEOs have become increasingly concerned about the economy, with the Business Roundtable CEO Economic Index falling by more than 40% in the most recent survey (August 23 to September 8) since its peak in the fourth quarter of 2021. Only 27% of surveyed CEOs expect employment at their firms to increase during the next six months ― down from 47% this time last year.[vi]

5. Marital Miss

A recent analysis suggests that almost one-quarter (24%) of married couples fail to coordinate and optimize contributions made to their employers’ retirement plans ― i.e., by maximizing their contributions to the spouse’s plan with the highest employer match. The authors estimate that the average foregone match by households is nearly $700 per year.[vii]

6. Earning Down the House

The share of median income in the U.S. needed to afford a median-priced home has spiked to 43.2% from 32.2% at the beginning of 2022. The California region of San Francisco-Oakland-Hayward ― where median income and home prices are $125,636 and $1,291,472, respectively, is the least affordable metro area, whereas Pennsylvania’s Scranton-Wilkes-Barre-Hazleton region ― where median income and home prices are $67,188 and $200,317, respectively, is the most affordable.[viii]

7. Summer Slide

In summer, the employment rate among prime working-age U.S. women falls by -1.1%, and the total hours they work decreases by -9.8%, more than twice the decline among men. This results in a -3.3% drop in women’s weekly earnings during the summer months, about five times the drop in men’s income.[ix]

8. Leaders of the Free World

Research suggests that use of 10 popular free “digital goods” ― Facebook, Twitter, Instagram, WhatsApp, Snapchat, TikTok, Google Search, Google Maps, YouTube and Amazon Shopping ― generates more than $2.5 trillion each year in aggregate benefits to consumers across 13 countries. Although not factored into GDP measures, this benefit is roughly equivalent to 6% of the nations’ combined GDP.[x]

9. It’s a Small World

The world’s first exchange for trading Daily Revenue Obligations, a financial contract that provides owners a fraction of a business’s revenue, has opened in Macau, with $300 million in issuance during its first month of trading.[xi] The exchange offers access to micro and small businesses in mainland China, which the exchange says account for more than 60% of China’s GDP and 97% of its market entities.[xii]

10. Bears that Donut Care

Two bears on an Alaska military base raided a Krispy Kreme van last week, enjoying donuts for about 20 minutes and ignoring banging on the sides of the vehicle.[xiii] The bears may soon visit a McDonald’s drive-through: The chain is selling Krispy Kremes at 160 locations in Kentucky and may expand the partnership nationally. Krispy Kreme has increased “global points of access” to its donuts by 12.8% year-over-year.[xiv]

[i] FactSet, total returns as of September 22, 2023.

[ii] Federal Open Market Committee, Summary of Economic Projections, September 20, 2023, https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm. Accessed September 25, 2023.

[iii] Board of Governors of the Federal Reserve System (US), Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis [DGS10], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/DGS10. Accessed September 25, 2023.

[iv] FactSet, total returns as of September 22, 2023.

[v] CNN Business, Fear & Greed Index, as of September 22, 2023, https://www.cnn.com/markets/fear-and-greed. Accessed September 25, 2023.

[vi] Business Roundtable, “Business Roundtable CEO Economic Index Continues to Dip Modestly on Hiring Plans, Amid Slowing Global Economy,” https://www.businessroundtable.org/media/ceo-economic-outlook-index. Accessed September 25, 2023.

[vii] Choukhmane, Taha, Lucas Goodman and Cormac O’Dea, “Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples” April 2023, NBER Working Paper No. w31195, https://ssrn.com/abstract=4433874. Accessed September 25, 2023.

[viii] Federal Reserve Bank of Atlanta, Home Ownership Affordability Monitor, June 2023, https://www.atlantafed.org/center-for-housing-and-policy/data-and-tools/home-ownership-affordability-monitor. Accessed September 25, 2023.

[ix] Price, Brendan M. and Melanie Wasserman, “The Summer Drop in Female Employment,” NBER Working Papers 31566, National Bureau of Economic Research, Inc., 2023, https://ideas.repec.org/p/nbr/nberwo/31566.html. Accessed September 25, 2023.

[x] Brynjolfsson, Erik, Avinash Collis, Asad Liaqat, Daley Kutzman, Haritz Garro, Daniel Deisenroth, Nils Wernerfelt and Jae Joon Lee, “The Digital Welfare of Nations: New Measures of Welfare Gains and Inequality,” NBER Working Paper No. 31670, September 2023, https://www.nber.org/papers/w31670. Accessed September 25, 2023.

[xi] The Economist, “Forget Gambling,” September 23, 2023.

[xii] MCEX, as of 2021, https://mcex.mo/investor/. Accessed September 25, 2023.

[xiii] AP News, “Bears Raid a Krispy Kreme Doughnut Van Making Deliveries on an Alaska Military Base,” September 18, 2023, https://apnews.com/article/alaska-bears-doughnuts-krispy-kreme-van-48a6b83875f3f8f4454780d868130539. Accessed September 25, 2023.

[xiv] Krispy Kreme, “Krispy Kreme Reports Second Quarter 2023 Results, Reiterates Full Year Guidance,” August 10, 2023, https://investors.krispykreme.com/news/news-releases/news-details/2023/Krispy-Kreme-Reports-Second-Quarter-2023-Results-Reiterates-Full-Year-Guidance/. Accessed September 26, 2023.