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Tag: recession

  • Stocks end mostly higher Monday despite resumed U.S. debt selloff

    Stocks end mostly higher Monday despite resumed U.S. debt selloff

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    Stocks closed mostly higher to kick off October as a sharp selloff in longer-dated U.S. government debt resumed. The Dow Jones Industrial Average
    DJIA,
    -0.22%
    fell about 74 points, or 0.2%, ending near 33,433, according to preliminary FactSet data. The S&P 500 index
    SPX,
    +0.01%
    ended flat at 4,288, while the Nasdaq Composite Index
    COMP,
    +0.67%
    gained 0.7%. Surging long-term borrowing costs remain a key focus in the final quarter of 2023, with the fear being they could derail the U.S. economy and spark more corporate defaults. The benchmark 10-year Treasury yield was punching higher to about 4.682% on Monday. Evidence of the debt rout could be found in the popular iShares 20+Year Treasury Bond ETF,
    TLT,
    -1.98%
    which cemented its lowest close since since August 2007 and in the iShares Core U.S. Aggregate Bond ETF,
    AGG,
    -0.70%
    which finished at its lowest since October 2008, according to Dow Jones Market Data. Investors in short U.S. government T-bills, however, have been mostly insulated from recent volatility, with yields steady in the 5.5% range, according to TradeWeb data.

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  • ‘Anxiety’ high as stock market falls, bond yields rise — what investors need to know after S&P 500’s worst month of 2023

    ‘Anxiety’ high as stock market falls, bond yields rise — what investors need to know after S&P 500’s worst month of 2023

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    U.S. stocks and bonds are both falling again, with the S&P 500 just wrapping up its worst quarterly performance in a year after another surge in Treasury yields. 

    “That creates a lot of anxiety,” as there’s still a fair amount of “investor PTSD” from last year, when markets were rocked by losses in both equities and bonds, said Phil Camporeale, a portfolio manager for J.P. Morgan Asset Management’s global allocation strategy, by phone.

    But it’s not the same environment.

    Last year was about the Federal Reserve rushing to tame runaway inflation with rapid interest-rate hikes after being “behind the curve,” he said. Now investors are grappling with a surge in Treasury yields after the Fed in September doubled its U.S. growth forecast this year to 2.1%, according to Camporeale, pointing to the central bank’s latest summary of economic projections.

    “This is your kiss-your-recession-goodbye trade,” he said, with sharp market moves in September reflecting the notion that “the Fed is not easing anytime soon.”

    The U.S. labor market has been strong despite the central bank’s aggressive tightening of monetary policy, with the unemployment rate at a historically low 3.8% in August. In September, the Fed projected the jobless rate could move up to 4.1% by the end of next year, below its previous forecast from June.

    “Inflation is falling,” Camporeale said. “The most important metric right now is the labor market.”

    As he sees it, investors are worried that the Fed will hold interest rates higher for longer should the unemployment rate remain low and the labor market “tight.” The Fed projected in September that it could raise rates once more this year before reaching the end of its hiking cycle, with fewer potential rate cuts penciled in for 2024 than previously forecast. 

    Investors expect to get a look at the U.S. employment report for September this coming week, with nonfarm payrolls data scheduled to be released on Oct. 6.

    See: Government shutdown averted for now as Congress approves 45-day funding bridge

    Meanwhile, the U.S. stock market ended mostly lower Friday, with the Dow Jones Industrial Average
    DJIA,
    S&P 500
    SPX
    and Nasdaq Composite
    COMP
    all closing out September with monthly losses as investors weighed fresh data on inflation. 

    A reading Friday of the Fed’s preferred inflation gauge showed that core prices, which exclude volatile food and energy categories, edged up 0.1% in August. That was slightly less than expected. Meanwhile, the core inflation rate slowed to 3.9% over the 12 months through August. 

    But headline inflation measured by the personal-consumption-expenditures price index rose more than the core reading on a month-over-month basis, as higher gas prices fueled its increase. 

    S&P 500’s worst month of 2023

    Investors have been anxious that the Fed may keep rates high for longer to bring inflation down to its 2% target. 

    Friday’s close left the S&P 500 logging its worst month since December, dropping 4.9% in September for back-to-back monthly losses. The S&P 500 sank 3.6% in the third quarter, suffering its biggest quarterly loss since the three months through September in 2022, according to Dow Jones Market Data. 

    The U.S. stock market has been startled by surging bond yields following the Fed’s policy meeting in September, after being jolted by the rise in Treasury rates in August.

    “The price to pay for a resilient economy is higher yields,” said Steven Wieting, chief economist and chief investment strategist at Citi Global Wealth, in an interview. “We’re probably near the peak in yields.”

    The yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    ended September at 4.572%, after rising just days earlier to its highest level since October 2007, according to Dow Jones Market Data. Yields and debt prices move opposite each other.

    But for Camporeale, it’s still too early to venture out to the back end of the U.S. Treasury market’s yield curve to add duration to bondholdings. That’s because the yield curve is not yet “re-steepened” and he views the U.S. economy as currently on course for a soft landing with rates staying higher for longer.

    “If you avoid recession, why should you have a lower yield as you go out in time?” said Camporeale. “You should be compensated for having more yield as you go out in time if you avoid recession, not less.”

    The 2-year Treasury rate
    BX:TMUBMUSD02Y
    finished September at 5.046%, continuing to yield more than 10-year Treasury notes.

    The yield curve has been inverted for a while, with short-term Treasurys offering higher rates than longer-term ones. The situation is being monitored by investors because historically such inversion has preceded a recession. 

    “If we were nervous about growth we would be buying the 10-year part of the curve or the 30-year part of the curve,” said Camporeale. “But we are not doing that right now.”

    As for asset allocation, he said he’s now neutral stocks and overweight U.S. high-yield credit, particularly bonds with shorter durations of one to three years. 

    Camporeale sees junk bonds as a “nice” trade as he is not expecting a recession in the next 12 months and they are providing “enticing” yields versus the U.S. equity market, which probably has most of its returns in “versus what we think you get through the rest of the year.”

    The S&P 500 index was up 11.7% this year through September, FactSet data show. 

    While watching for any signs of deterioration in the labor market, Camporeale said he now anticipates the earliest the Fed may cut rates is in the second half of next year. To his thinking, the recent move higher in 10-year Treasury yields was appropriate “in a world where maybe the yield curve has to re-steepen.” 

    ‘Pain trade’

    Bond prices in the U.S. broadly dropped in September along with the stocks. 

    The iShares Core U.S. Aggregate Bond ETF
    AGG
    was down 2.6% last month on a total return basis, bringing its total loss for the third quarter to 3.2%, according to FactSet data. That was the fund’s worst quarterly performance since the third quarter of 2022.

    The ETF, which tracks an index of investment-grade bonds in the U.S. such as Treasurys and corporate debt, has lost 1% on a total return basis so far this year through September, FactSet data show. Meanwhile, the iShares 20+ Year Treasury Bond ETF
    TLT
    has seen a total loss of 9% over the same period.

    “Few investors want to call the top for peak rates,” said George Catrambone, head of fixed income at DWS, in a phone interview. Some bond investors had started to extend into long-term Treasurys in July. “That’s been the pain trade, I think, ever since then,” said Catrambone.

    As for the equity market, the speed of the move up in 10-year Treasury yields hurt stocks, with the rate climbing “well beyond what many assumed would be the upper end,” according to Liz Ann Sonders, chief investment strategist at Charles Schwab. 

    With higher rates pressuring equity valuations, “clearly what’s going to matter is third-quarter-earnings season, once that kicks in” during October, she said by phone. Company “earnings are going to have to start to do some more heavy lifting.”

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  • Here’s what Germany should be called instead of the ‘sick man of Europe,’ says Deutsche Bank

    Here’s what Germany should be called instead of the ‘sick man of Europe,’ says Deutsche Bank

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    The hurdles facing Germany’s economy in recent years have been plentiful, but the “sick man of Europe,” label is unfair, say Deutsche Bank strategists, who see promise for investors in the region’s biggest economy.

    Contrary to the rest of the eurozone, Germany has only managed to get back to its pre-COVID growth level, yet a title of “sore athlete” is more accurate, say Maximilian Uleer, head of European equity and cross asset strategy and Carolin Raab, European equity and cross asset strategists, in a note to clients that published Friday.

    “Germany has been facing multiple challenges, from rising energy costs, its high manufacturing exposure, to weak demand from its export destinations. Some of the challenges are ‘homemade’ and might persist, while others could start to unwind and soon turn into opportunities,” the pair said.

    Germany’s economy is the worst-performing of the developed world this year, with both the International Monetary Fund and European Union forecasting contractions in growth.

    Read: Germany’s economy struggles with an energy shock that’s exposing longtime flaws

    But the strategists say economic growth is a poor proxy for German equity performance. The German DAX index
    DX:DAX
    is up 18% since the end of 2019. DAX constituents generate just 18% of their revenues domestically, compared to 22% from the U.S. and 15% from China.

    Across the broader HDAX index of 100 members, manufacturing, information technology and financial services are the main contributors to equity performance. That’s as public services, trade, business services and real estate, all of which contributed significantly to GDP over the past four years, are underrepresented in the indexes.

    Germany has also managed to grow its real GDP by 26% over the past 20 years , and keep its debt-to-GDP ratio stable, while the eurozone (including Germany) has seen that debt ratio climb 30% since 2003. The short term has seen lower growth since COVID-19, and rising leverage owing to fiscal support measures to mitigate the pandemic and the war in Ukraine.

    Again, the strategists see a silver lining. “Going forward, in our view, Germany has bigger leeway with regards to its fiscal support capacity, as its absolute debt/GDP ratio remains one of the lowest among the eurozone members,” said Uleer and Raab.


    *Since 2003: Q3 2003-Q2 2023 / since Covid: Q4 2019-Q2 2023. Source: Bloomberg Finance LP, Deutsche Bank Research 09/20/2023

    Among the country’s big hurdles is rising energy costs, with the pair noting that the country’s net-zero goals are laudable, but pose a “substantial challenge” to its energy-intensive industries. Power prices remain substantially higher than three years ago and are double the cost of those in the U.S.

    Also read: Inside Germany’s industrial-sized effort to wean itself off Putin and Russian natural gas

    “This price differential, combined with stronger fiscal support for energy-intensive companies in the U.S. via the Inflation Reduction Act, weigh on the competitiveness of German corporates,” said the strategists.

    As for opportunities, China’s reopening remains a positive for DAX companies, though that country also seems to be making slow progress. Chinese households are sitting on massive savings still waiting to be spent, said the strategists. They advise investors to wait for data that confirms a stabilization of the country’s bumpy property market before they would turn more positive.

    Overall, Deutsche Bank expects inflation to normalize in the coming 12 months and low growth in 2024, but a rebound in 2025.

    Plus: A 1-liter stein of beer at Munich’s famed Oktoberfest will cost nearly $15 this year

    And what’s priced into the DAX already? Even after a gain of 12% this year so far — French
    FR:PX1
    and Greek stocks
    GR:GD
    — are beating Germany by a respective 20% and 30% — the index is still cheap and trading at a 20% discount to its 10-year average on a forward one-year price/earnings basis. Germany can count on stronger U.S. data, even if Europe continues on a weak path.

    “We expect the DAX to hold up in 2024, and do not forecast the index to underperform, despite lower German GDP growth as compared with the rest of the eurozone,” they said.

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  • The Fed’s got inflation dead wrong. That’s why a 2024 recession is likely, says Duke professor.

    The Fed’s got inflation dead wrong. That’s why a 2024 recession is likely, says Duke professor.

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    Campbell Harvey, a Duke University finance professor best known for developing the yield-curve recession indicator, says the Federal Reserve’s read on inflation is out of whack. And, as a result, the likelihood that the U.S. slips into a recession is increasing.

    The big question now is the severity of the economic downturn to come, if the central bank continues unabated on its high-interest-rate path.

    On Wednesday, the Fed, which began raising rates from near zero last year, held them at a range of 5.25% to 5.5%, a 22-year high, in its effort to get inflation under control.

    “The [inflation gauge] that the Fed uses makes no sense whatsoever, and it’s totally disconnected from market conditions,” Harvey told MarketWatch in a phone interview.

    The Fed’s measures of inflation are heavily weighted toward shelter costs, which reflect the rising price of rental and owner-occupied housing. For example, shelter inflation has been running at 7.3% over the past 12 months, and also as of the most recent consumer-price index, for August. Shelter represents around 40% of the core CPI reading.

    Harvey says that’s a problem because shelter’s retreat loosely follows the broader trend lower for headline inflation but at a lag, and the Fed wouldn’t be properly accounting for that lag if it decided to keep its target interest rates restrictively high.

    Separately, MarketWatch’s economics reporter, Jeff Bartash, notes that CPI also fails to capture the millions of Americans who locked in low mortgage rates before or during the pandemic and who are now paying less for housing than they had previously.

    “The Fed is … using inflation, in what I call a false narrative,” Harvey said.

    Opinion: Fed’s ‘golden handcuffs’: Homeowners locked into low mortgage rates don’t want to sell

    Also see: U.S. mortgage rates ‘linger’ over 7%, Freddie Mac says, slowing the housing market further

    Harvey said that if shelter inflation were normalized at around 1% or 1.5%, overall core inflation would measure closer to 1.5% or 2%. In other words, at — or substantially below — the Fed’s 2% target.

    Consumer prices ex-shelter were up 1.9% on a year-over-year basis in August, up from 1% in July, according to the Labor Department.

    The Canadian-born Duke professor says that the Fed risks driving the U.S. economy into recession because it has achieved its goal of taming inflation, which peaked at around 9% in 2022, and isn’t making it clear that its rate-hike cycle is complete.

    “Now, the higher those rates go, the worse [the recession] is,” he said.

    Harvey pioneered the idea that an inverted yield curve is a recession indicator, with the curve’s inversion depicting the yield on three-month Treasurys rising above the rate on the 10-year Treasury note
    BX:TMUBMUSD10Y.
    Longer-term Treasurys typically have higher yields than shorter-term U.S. government debt, and the inversion of that relationship historically has predicted economic contractions.

    Harvey says that that his yield-curve-inversion model has an unblemished track record — 8-out-of-8 — for predicting recessions over the past 70 years. A recent inversion of U.S. yield curves implies that a U.S. recession is still a possibility.

    Opinion: The U.S. could be in a recession and we just don’t know it yet

    Also see: Are markets getting more worried about a recession? Invesco says a Fed pivot is coming.

    On Thursday, the Dow Jones Industrial Average
    DJIA
     fell 1.1%, while the S&P 500
    SPX
    tumbled1.6% and the Nasdaq Composite
    COMP
    slumped 1.8%, marking one of the worst days for stocks in months. 

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  • This former Fed insider has 3 big takeaways from Powell’s press conference

    This former Fed insider has 3 big takeaways from Powell’s press conference

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    This former Fed insider has 3 big takeaways from Powell’s press conference

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  • Fed’s revised dot plot for interest rates makes wall of maturing debt a bigger worry

    Fed’s revised dot plot for interest rates makes wall of maturing debt a bigger worry

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    The Federal Reserve on Wednesday surprised markets with a fortification of its higher-for-longer stance on interest rates, penciling in only half as many rate cuts next year as had been expected.

    Fed officials kept the central bank’s policy rate at a 22-year high, but redrew their so-called “dot plot,” a chart of the potential path of short-term rates over time, in a less favorable way for borrowers.

    The…

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  • Most long-term investors can ignore whatever the Federal Reserve does today

    Most long-term investors can ignore whatever the Federal Reserve does today

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    The Federal Reserve’s moves — or lack thereof — will affect everyone. And almost no one.

    While market pundits have been trying to get their hands on the any indication of what the Federal Open Market Committee’s policy announcement will say on Wednesday, individual investors have stuck their hands in their own pockets and left them there.

    The…

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  • We’re Not in a Recession — It’s All Hype. Here’s Why. | Entrepreneur

    We’re Not in a Recession — It’s All Hype. Here’s Why. | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    The so-called post-Covid recession initially emerged as a global economic downturn following the widespread impact of the Covid-19 pandemic on businesses and economies. Characterized by widespread unemployment and reduced consumer spending, the “recession” dealt a severe blow to industries heavily reliant on human interaction.

    It is said that the “recession” prompted a shift in consumer behavior, with increased emphasis on ecommerce, remote work and digital services, accelerating the adoption of technological advancements.

    While some industries floundered, others experienced unexpected growth, such as pharmaceuticals, online entertainment and certain segments of the technology sector. As vaccination efforts progressed and the pandemic’s grip began to loosen, economies cautiously started to recover, but the long-term repercussions continued to shape policy decisions and economic strategies for years to come.

    The whole economic picture has made me wonder whether there has ever been a real recession.

    My stance on this: The great post-Covid recession wasn’t real. It was inflated and hyped by the media. Here is how it happened.

    Related: Our ‘Rolling Recession’ Is the Latest Economic Meme — But What Does It Actually Mean?

    Budget surplus

    The world printed a lot of money to get through Covid-19, probably too much. The global response to the COVID-19 pandemic prompted countries to adopt expansive monetary policies, resulting in a significant increase in money supply as governments aimed to stabilize their economies.

    Remarkable fiscal measures were taken, including printing money, lowering interest rates and enacting extensive stimulus packages. These interventions averted an immediate economic catastrophe and led to an unexpected outcome for some countries: budget surpluses.

    Increased government spending and reduced economic activity due to lockdowns meant that the money injected into the economy often exceeded the actual demand for goods and services. Certain sectors of the economy remained relatively stagnant while the money supply continued to grow.

    While a budget surplus might seem like a positive outcome, it also brought challenges. While it offered opportunities for financial resilience and investment in key areas, it also posed challenges in terms of managing the money supply, preventing inflation and making strategic allocation decisions.

    Related: 5 Ways to Get Media Coverage for Your Brand

    Financial market bubble

    The surplus created a bubble in financial markets, spurring the initial media frenzy capturing the attention of experts, investors and the general public alike.

    Memories of past market crashes and economic downturns fueled the media frenzy, surrounding the post-Covid bubble. Experts weighed in on the potential consequences of such inflated valuations, warning of the risk of a sudden and dramatic correction that could wipe out gains and impact broader economic stability.

    As a result, regulatory bodies and central banks faced heightened pressure to monitor and manage the situation. Striking a delicate balance between sustaining economic recovery and preventing speculative excesses required careful policy decisions and timely interventions to avoid a potential market collapse.

    Strong labor market activity

    What’s important to note is that the labor market activity remained strong, thereby offsetting the potentially catastrophic impact of the inflated markets with real economic growth.

    Contrary to the prevailing narrative of widespread economic disruption during the COVID-19 pandemic, the labor market activity in some sectors exhibited surprising resilience, demonstrating that not all industries were equally affected.

    While many businesses faced closures, restrictions and job losses, certain sectors experienced remarkable stability and even growth amid the crisis.

    One such sector was technology and remote work. As lockdowns and social distancing measures took effect, the demand for digital services and technology solutions surged. Companies in the tech industry rapidly transitioned to remote work models, which not only preserved jobs but also created opportunities for professionals specializing in software development, IT support and digital communication tools.

    Related: Corporate Productivity in the Tech Industry Is Down: What Is the Real Reason?

    Growth of the ecommerce sector

    The ecommerce industry also saw significant expansion during the pandemic. With traditional brick-and-mortar stores constrained by closures and reduced foot traffic, online retailers flourished. This led to increased demand for warehouse workers, delivery personnel and customer service representatives to handle the surge in online orders and maintain high service standards.

    As traditional brick-and-mortar stores faced restrictions and closures, online retailers surged to meet the increased demand for remote shopping, leading to an expansion in job opportunities within the ecommerce ecosystem. The warehousing and logistics sectors witnessed substantial growth, driven by the need to fulfill online orders efficiently. Warehouse workers, packers and delivery drivers became essential roles as companies hired and scaled up operations to cope with the surge in online shopping. Moreover, customer service representatives and support staff were in high demand to ensure smooth order processing, address customer inquiries and manage returns.

    The expansion of ecommerce led to openings in various domains, including digital marketing, web development and data analysis, as companies sought to enhance their online presence and optimize customer experiences. Additionally, roles related to supply chain management, inventory control and last-mile delivery gained prominence to ensure the seamless flow of products to consumers’ doorsteps.

    The ecommerce labor market growth wasn’t only a response to immediate needs but also reflected a broader shift in consumer behavior, accelerating the ongoing digital transformation of retail. Remote work opportunities also emerged in fields like online customer engagement and technical support as businesses aimed to replicate in-store experiences virtually.

    News-driven recession

    We would never have known the whole story from listening to the news.

    Sensational headlines and dramatic news coverage contributed to the atmosphere of heightened uncertainty and fear regarding the state of the economy.

    Some media outlets focused on worst-case scenarios, exaggerating the scale of job losses, business closures and economic contraction. The media’s portrayal of economic hardships at times failed to acknowledge the resilience of certain sectors and industries that managed to adapt and even thrive during the crisis.

    While there were undoubtedly challenges, the media’s tendency to amplify negative aspects created an inaccurate perception of an all-encompassing economic collapse.

    What conclusions can we draw?

    Take media rhetoric with a grain of salt. Not every day is doomsday.

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    Max Faldin

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  • UK Economy Shrank More Sharply Than Expected in July

    UK Economy Shrank More Sharply Than Expected in July

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    By Joshua Kirby

    The U.K. economy contracted more than expected in July, suggesting activity is cooling in the face of monetary tightening by the Bank of England.
    

    Gross domestic product fell 0.5% compared with the previous month, data from the Office for National Statistics showed Wednesday. This missed forecasts for a shallower 0.2% fall in output, according to economists polled by The Wall Street Journal ahead of the release.
    

    

    On an annual basis, the economy was flat in July, the figures showed. Economists had expected a 0.4% rise.
    

    The contraction comes after the economy grew above expectations in the second quarter, driven by a stronger-than-expected services sector. The fallback in July suggests the Bank of England’s policy of raising interest rates is beginning to take some heat out of the U.K. economy.
    

    The BOE will next week decide to meet whether to raise its benchmark rate again, past its current 5.25%, as it looks to ease rapid price inflation.
    

    Unemployment figures earlier this week showed the U.K. jobless rate inching up in the three months to July, though wage growth remained steady in the same period.
    

    Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby
    

    

    

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    5 Recession-Proof Businesses to Start in a Turbulent Economy | Entrepreneur
    
			
    5 Recession-Proof Businesses to Start in a Turbulent Economy | Entrepreneur
    
			
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    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    Economic downturns are no joke. Recession throws a massive cog in the proverbial wheels of several established entrepreneurs as well as new startup owners. A recent study by Startup Genome found that a staggering 74% of startups saw their revenues plummet since the pandemic. Even more grim is how many of these (16%) were forced to lay off 80% of their workforce.
    

    No wonder, then, that companies are afraid to raise capital, or even start a business at all. Experts are warning about an impending global recession, so companies are apprehensive about scaling, hiring new talent and retaining the ones they have.
    

    However, not all startups struggle in times of recession and economic downturns. Some startups may, in fact, thrive during economic crises. As someone who has been in the VC industry for over a decade, sold several companies and launched an accelerator that helped over 200 entrepreneurs, I have learned that there is a crucial difference between startups that survive and succeed in a recession and those that struggle and fail. That difference is in the business model itself.
    

    As the CEO of Builderall, an all-in-one solution supporting over 20,000 small businesses worldwide, I have a bird’s eye view of the best-performing business models. Where other startups flounder, startups in our ecosystem continue to pull in more customers. In fact, we do not experience an economic downturn at all.
    

    If you are wondering whether to start your business, scale your startup or cut back operations, read on for the five recession-proof businesses I recommend during turbulent times:
    

    Related: 10 Businesses to Start That Can Weather Any Economy
    

    1. Service-based businesses
    

    Any time you provide a skilled service to your customers, whether online or offline, it’s a service-based business. For instance, a bookkeeping/accounting service or a digital marketing agency both provide services that require special knowledge and expertise. These companies are really crushing it today — and for more than one reason:
    

      

    • 

      Their startup costs are low. Entrepreneurs can get started with a lower initial investment and fewer subsequent capital infusions.
      

      • 

    • 

      They can operate with a minimal workforce. Companies can go fully remote with the advantage of tapping into low-cost talent markets, or they can go hybrid.
      

      • 

    • 

      Faster turnover and revenue generation. Receiving payments from new clients and generating cash flow happen much more quickly.
      

      • 

    • 

      Recurring payments keep the money flowing in. Service-based companies can benefit from employing subscription or retainer models. This guarantees two things: repeat customers and a continuous revenue stream in exchange for ongoing services.
      

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    Customers are effectively fronting the cost, which reduces the necessity for venture capital or working capital. Then, three years later, they have built up a solid customer base of recurring revenue customers who simply keep paying on a monthly basis, and the money from those payments becomes your operating expenses.
    

    2. Influencer marketing
    

    You really can’t go wrong with being an influencer. It won’t be a stretch to say that influencers are ruling the digital world right now. Look at what Khaby Lame, Zach King, Addison Rae and Charli D’Amelio have achieved. During my years in business, I have closely followed the rise of several popular influencers, and I have found two common threads among all of them:
    

    One, all successful influencers work in a particular space or in a specific niche in which they are experts and know what they are talking about. And two, they are pure content creators, and their content resonates with their audiences, helping them attract more followers.
    

    Once you amass a substantial following on social media platforms such as Instagram, YouTube or TikTok — that’s when the magic begins. You leverage your online presence to engage with your audience and promote products or services, effectively becoming brand advocates for the companies you work with.
    

    3. Brand ambassadorship
    

    Being a brand ambassador is a close off-shoot of the influencer business. A brand ambassador has always been a cornerstone of successful marketing for several companies. Back in the day, when social media wasn’t a thing, only A-list celebrities or professional athletes and musicians would get top dollar for their endorsements.
    

    Like influencers, brand ambassadors also excel in specific niches. They position themselves as thought leaders or experts, and the association with them brings credibility to the brands they are endorsing. While influencer relationships are typically one-off arrangements, brand ambassadors generally work with the same brand for years and provide a deeper level of exposure and education for their audiences.
    

    Related: Scared of a Recession? Follow These 5 Tips For a Recession-Proof Business
    

    4. Online educators
    

    With upskilling and side hustling turning into major buzzwords, I have seen so many people asking, “What else I could do?” on social media platforms like Reddit and Twitter. Those who get laid off want to increase their skill set and willingly pay hundreds or even thousands for continuing specialized education rather than returning to college or seeking an advanced university degree. This is the major reason why online educators are making a killing by selling their courses online.
    

    People are learning all sorts of skills on e-learning platforms today. For example:
    

    How to turn sketches into finished digital artwork
    

    How to compose music
    

    How to create effective marketing funnels
    

    How to write screenplays
    

    Online educators are just normal people who are good at what they do. Becoming an online educator requires just taking the knowledge that they have, putting it into a course and selling it. They craft an exhaustive course structure and deliver courses that cover an extensive range of subjects, from practical skills to creative arts and everything in between. Platforms with user-friendly e-learning tools are making this easier than ever.
    

    Marketing, business, entrepreneurship, creative arts, coding and personal development are always popular with learners.
    

    5. Unique products
    

    Selling a unique product can be a tough nut to crack. But when a company achieves this feat, it can consider itself practically recession-proof. There are startups in the market that are selling a one-of-a-kind product to a narrow, but interesting, subset of consumers. It could be T-shirts, stickers, plush toys or anything else.
    

    And with the online platforms available today, it is so simple to launch an online shop, spread awareness and begin building a customer base. Paid ads are something that big companies use as they scale. But when you’re a small company, you can get creative and use Instagram reels and TikToks to drive audiences to your product. Try to create a niche product as opposed to trying to sell basic T-shirts to everybody, which is very difficult. Do something that’s very targeted to a specific niche. For instance, you can come out with a whole line of T-shirts for people who love unicorns.
    

    Related: 3 Key Strategies That Helped My Business Grow During a Recession
    

    At Builderall, we have not seen businesses negatively affected by the recession; if anything, it has been a positive catalyst for entrepreneurs. According to this recent survey by Gusto, 56% of individuals launched a business due to concern over inflation. The World Economic Forum reports that women entrepreneurs increased to 47% in 2022 up from 27% in 2019.
    

    So, while it may seem scary to try to launch or scale a company in today’s economy, with the right business model, now is the perfect time — and the future is bright.
    

    

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     Pedro Sostre
    

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  • 
		
		
    
			
    Eurozone Braced for Weaker Growth in 2023, 2024, EU Forecasts Say
    
			
    Eurozone Braced for Weaker Growth in 2023, 2024, EU Forecasts Say
    
			
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    By Joshua Kirby and Ed Frankl
    

    The eurozone is likely to grow at a slower pace than previously expected this year and next amid weak domestic consumption and flagging global demand, with the powerhouse German economy notably set to shrink, according to fresh figures published by the European Union executive Monday.
    

    

    The 20-member bloc should book growth of 0.8% this year and 1.3% in 2024, revised down from previous estimates in May of 1.1% and 1.6%, respectively, according to the European Commission.
    

    Weak private consumption amid stubbornly high inflation lies behind the gloomier outlook for economic growth, the EC said.
    

    “High and still increasing consumer prices for most goods and services are taking a heavier toll than expected in the spring forecast,” the commission said. Eurozone consumer prices rose 5.3% in August, failing to ease from the previous month.
    

    The forecasts come ahead of a key European Central Bank rate-decision meeting on Thursday, when the central bank will publish its own forecasts for the bloc’s economy and inflation. The bank is widely expected to lower its estimates for growth this year.
    

    The bloc’s economy notched growth of just 0.1% in the April-June period, according to revised figures published last week, and many economists expect the eurozone to stagnate in the second half of the year.
    

    Germany’s economy–the largest in the bloc–is now expected to contract, according to the EC’s new estimates. Gross domestic product should be 0.4% lower on year in 2023, compared with a previous estimate of slight growth. It would be the only one of the bloc’s major economies to slip backward, according to the forecasts, which see slightly higher growth for France and Spain than previously estimated.
    

    Closely watched economic forecasters including the German Institute for Economic Research and the Kiel-based IfW Institute last week ticked down their own expectations for German growth, which has been hamstrung by weaker industrial output.
    

    Inflation in the eurozone is meanwhile expected to stand at 5.6% for 2023 as a whole, a slightly lower forecast than the 5.8% previously estimated by the EC. However, inflation is set to ease less rapidly next year than previously forecast, with prices to rise by 2.9% on year rather than by 2.8%, according to the new estimates.
    

    The higher forecast comes despite an easing of the energy bills that spiked last year after Russia’s fullscale invasion of Ukraine, the commission said. Higher oil prices might slow the downward trajectory of inflation next year, but prices for services and food should ease steadily amid high interest rates, lower input prices and smoother supply chains, the commission said.
    

    Nevertheless, a tighter monetary policy–with an unprecedent cycle of interest-rate rises by the ECB with the aim of stemming inflation–has begun to feed into the wider economy, damping industrial production and demand, the EC said. Industrial output is weakening and services growth is fading, despite resurgent tourism in many eurozone members, it said.
    

    The sluggishness should continue next year, with little prospect of a major rebound in growth, the EC said. Global demand remains weak as the Chinese economy grinds to a halt, the commission said, meaning the bloc can’t rely on external demand to offset lower domestic consumption.
    

    Nevertheless, lower inflation, continued strength in the jobs market and resultant rises in real wages offer some bright spots for the coming year, the commission said. The bloc’s labor market has remained “exceptionally strong,” with record low unemployment rates and rising wages, it said.
    

    “Monetary tightening may weigh on economic activity more heavily than expected, but could also lead to a faster decline in inflation that would accelerate the restoration of real incomes,” it said. The Russia-Ukraine conflict continues to cast a pall of uncertainty over the outlook, the EC said, as does the climate crisis, which has led to disastrous wildfires and floods in many parts of the continent over the summer.
    

    Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby, and to Ed Frankl at edward.frankl@wsj.com
    

    

    

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    U.S. economy seen growing at about a 2.2% annual rate in the July-September quarter, according to real-time New York Fed estimate
    
			
    U.S. economy seen growing at about a 2.2% annual rate in the July-September quarter, according to real-time New York Fed estimate
    
			
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    The U.S. economy could expand at about a 2.2% annual rate in the current quarter, according to a revamped real-time estimate from the New York Federal Reserve released Friday.
    

    According to the weekly New York Fed’s Staff Nowcast, the economy has been on an upward trend since late July.
    

    

    The regional Fed bank had discontinued the real-time estimate during the pandemic. The New York Fed said the series will now be available weekly.
    

    The New York Fed’s estimate is much lower than the Atlanta Fed’s GDPNow model, which shows growth could expand at a 5.6% annual rate in the current quarter.
    

    Economists say the strength of the economy will be critical going forward in deciding whether the Federal Reserve needs to continue to raise its policy interest rate to cool inflation.
    

    The Fed has been expecting the economy to slow in the second half of the year. Fed officials forecast only 1% growth for 2023. In the first six months of the year, U.S. gross domestic product is averaging about a 2% growth rate.
    

    If the economy reaccelerates, it is likely that inflation will also move higher. Fed officials had been hoping that slower economic growth would continue push down inflation.
    

    Faster growth means “you are probably going to get some inflation numbers that aren’t going to be as good as people were anticipating,” said James Bullard, the former president of St. Louis Fed president and now dean of Purdue’s business school.
    

    “There is some risk that the Fed will have to go a little bit higher” even than the one more interest rate hike that the central bankers have penciled in this year, he said, in a recent CNBC interview.
    

    The first official government estimate of third-quarter growth won’t be released until Oct. 26. 
    

    The picture of the health of the economy painted by U.S. GDP statistics can change quickly. 
    

    The growth estimates for the first half of the year could be revised at the end of September when the Commerce Department releases benchmark updates to GDP data.
    

    The sharp revisions are one of the reasons why the Fed typically pays more attention to the unemployment rate and the inflation data. 
    

    

    

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    Fed’s Williams says monetary policy is in a ‘good place,’ recession talk ‘has vanished’
    
			
    Fed’s Williams says monetary policy is in a ‘good place,’ recession talk ‘has vanished’
    
			
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    New York Fed President John Williams on Thursday sounded content with the current level of interest rates, but said he will be watching data closely to make sure the level of rates is high enough to keep inflation moving down.
    

    “We’ve done a lot,” Williams said during a discussion at a conference sponsored by Bloomberg News.
    

    “Right now, we’ve…
      
    

    

    

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    A recession could be nine months away, according to this telltale gauge
    
			
    A recession could be nine months away, according to this telltale gauge
    
			
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    The roughly $25 trillion Treasury market first began flashing this telltale sign that a U.S. recession likely lurks on the horizon almost a year ago, according to Bespoke Investment Group.
    

    It was late October of 2022 when the 3-month Treasury yield BX:TMUBMUSD03M first eclipsed the 10-year Treasury yield BX:TMUBMUSD10Y, resulting in an “inversion” of a key part of the yield curve that’s been a reliable predictor of past recessions.
    

    Where…
      
    

    

    

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    As U.S. stock-market investors celebrate soft economic data, is bad news becoming bad news again on Wall Street?
    
			
    As U.S. stock-market investors celebrate soft economic data, is bad news becoming bad news again on Wall Street?
    
			
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    With second-quarter earnings season now largely behind the market, stock investors have been focusing on the latest economic data. 
    

    They have, for the most part, been reacting positively to “bad economic news,” or any data that may point to an economic slowdown. 
    

    

    It’s been almost nine months since the trend emerged, as softening economic data and lower inflation may mean the Federal Reserve can stop raising interest rates, said Chris Fasciano, portfolio manager at Commonwealth Financial Network.
    

    Traders in federal-funds futures, as of Friday, are pricing in an over 90% chance that the Fed will hold its policy interest rate unchanged at its September meeting, and a roughly 35% likelihood that the U.S. central bank will raise interest rates by 25 basis points in November. 
    

    Read: The Fed’s monetary policy has lost some of its potency and interest rates may need to rise much higher as a result, economist says
    

    U.S. stocks closed the week higher ahead of the Labor Day holiday weekend, after data released Friday indicated a cooling labor market, though there was speculation that a “mirage” concerning the conclusion of summertime jobs may have factored. The U.S. created 187,000 new jobs in August, while the unemployment rate jumped to 3.8% from 3.5%.
    

    The data support the narrative of a gradual slowdown in the labor market, but there are no signs that the economy is weakening significantly, according to Richard Flax, chief investment officer at Moneyfarm.
    

    Also read: ‘Near perfect’ jobs report has traders expecting Fed to be done hiking rates this year
    

    “The economic data has not been bad. It is just softening. If you saw really bad economic data, that wouldn’t be taken particularly positively,” Flax said. 
    

    Meanwhile, “what we’re experiencing is a rolling recession,” said Jamie Cox, managing partner at Harris Financial Group. “Recession activity actually goes from sector to sector, but it doesn’t translate into this big broad-based decline.”
    

    However, if investors see a significant decline in the housing and labor markets, that could change the narrative, Cox noted. 
    

    Read: Fed rate hikes can end now that U.S. job gains are the size of an economy like Australia’s, says BlackRock
    

    To break the cycle in which bad economic news is good news for stocks, economic data have to be much worse than now, indicating more damage from high interest rates, noted Flax. 
    

    The trend may also reverse if there is a “meaningful downgrade” of corporate earnings expectations, said Flax. “I think you need to see it when macro data translates into weakened profitability.”
    

    Investors should also be alert of the possibility that inflation may accelerate again, according to David Merrell, founder and managing member at TBH Advisors. 
    

    Data showed that the personal consumption expenditures price index rose a mild 0.2% in July, but the yearly inflation rate crept up to 3.3% from 3%, the government said Thursday.
    

    “Inflation overall has been trending down nicely. But if it starts to kick back up, that could mean bad news becomes bad news now,” said Merrell. 
    

    If investors start to treat bad economic news as bad news for the stock market, it could put pressure on the 2023 stock-market rally, with the S&P 500
    
        SPX
    
       up 17.6% since the start of the year and the Nasdaq Composite
    
        COMP
    
       up 34%.
    

    In the past week, the Dow Jones Industrial Average
    
        DJIA
    
       climbed 1.4%, the S&P 500 advanced 2.5% and the Nasdaq gained 3.2%, according to Dow Jones Market Data. The S&P 500 posted its biggest weekly gain since the week ending June 16.
    

    This week, investors will be expecting data on the July U.S. international trade deficit and the ISM services sector activity for August on Tuesday, weekly initial jobless benefit claims data on Thursday, and the July wholesale inventories data on Friday. They will also tune into the speeches of a number of Fed speakers, looking for clues on whether the central bank is ready to be done with its rates hikes.
    

    Economic calendar: On this week’s economic-data docket are the Fed Beige Book, factory orders, unemployment claims and more
    

    

    

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    Wall Street is raising quarterly profit forecasts for the first time in two years, and executives are relaxing about recession prospects
    
			
    Wall Street is raising quarterly profit forecasts for the first time in two years, and executives are relaxing about recession prospects
    
			
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    After nearly two years of concerns about a recession, growing optimism about the economy is starting to filter down into Wall Street’s expectations for individual companies’ quarterly results, with analysts growing more upbeat about corporate profit in the months ahead 
    

    While expectations for those quarterly results usually trend lower as earnings season arrives, analysts over the past two months have actually nudged their profit forecasts higher for the first time in two years, according to a FactSet report released Friday….
      
    

    

    

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    Fed rate hikes can end now that U.S. job gains are the size of an economy like Australia’s, says BlackRock
    
			
    Fed rate hikes can end now that U.S. job gains are the size of an economy like Australia’s, says BlackRock
    
			
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    The Federal Reserve can probably end its inflation fight now that the U.S. labor market is cooling after generating a historic 26 million jobs in roughly the past three years, according to BlackRock’s Rick Rieder.
    

    “In fact, 26 million jobs is like adding an economy the size of Australia or Taiwan (including every man, woman, and child),” said Rieder, BlackRock’s chief investment officer in global fixed income, in emailed commentary following Friday’s monthly jobs report for August. 
    

    

    The August nonfarm-payrolls report showed the U.S. adding 187,000 jobs, slightly more than had been forecast, but also pointing to an uptick in the unemployment rate to 3.8% from 3.5%.
    

    “Remarkably, 22 million people were hired between May 2020 and April 2022, and 11 million were added to the workforce from June 2021 to May 2023, as the economy has opened up massive amounts of roles for fulfillment,” said Rieder.
    

    He expects wage pressures to ease, he said, and thinks the “economy may now have fulfilled many of its needs,” which should make the Fed feel more confident in “the permanence of lower levels of inflation,” so that it can slow or stop its interest-rate rises by year-end.
    

    Hiring in the U.S. has slowed, except in education and in healthcare services, when looking at private payrolls based on a three-month moving average.  
    

    

              
    

    

    

    Payrolls are slowing in many sectors, expect education and healthcare
    

          
    
            Bureau of Labor Statistics, BlackRock
    
          
    
  
    

    

    The Fed has already raised interest rates in July to a 5.25%-to-5.5% range, a 22-year high, with traders in federal-funds futures on Friday pricing in only about a 7% chance of a Fed rate hike in September and favoring no hike again at the central bank’s November policy meeting.
    

    Rieder of BlackRock, one of the world’s largest asset managers with $2.7 trillion in assets under management, said he thinks a Fed pause or outright end to rate hikes could calm markets, even if the Fed, as BlackRock expects, keeps rates high for a time.
    

    U.S. closed mostly higher Friday ahead of the Labor Day holiday weekend, with the Dow Jones Industrial Average
    
        DJIA
    
       up 0.3%, the S&P 500 index
    
        SPX
    
       up 0.2% and the Nasdaq Composite Index
    
        COMP
    
       0.02% lower, according to FactSet.
    

    The 10-year Treasury yield
    
        BX:TMUBMUSD10Y
    
       was at 4.173%, after hitting its highest level since 2007 in late August, adding to volatility that has wiped out earlier yearly gains in the roughly $25 trillion Treasury market.
    

    Read on: This hadn’t happened on the U.S. Treasury market in 250 years. Now it has.
    

    

    

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    U.S. consumer confidence retreats markedly in August, close to levels signaling recession
    
			
    U.S. consumer confidence retreats markedly in August, close to levels signaling recession
    
			
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    The numbers: The index of U.S. consumer confidence dipped to 106.1 in August from a revised 114 in the prior month, the Conference Board said Tuesday.
    

    Economists polled by The Wall Street Journal had forecast a modest pullback to 116 from the initial reading of 117, which was the highest level in two years.
    

    The revised July reading was the highest since December 2021.
    

    

    Key details: Part of the survey that tracks how consumers feel about current economic conditions fell to 114.8 this month from 153 in July. 
    

    A gauge that assesses what Americans expect over the next six months dropped to 80.2 from 88. The August reading is just above to 80 level that historically signals a recession within the next year.
    

    Big picture: The tight labor market had bolstered confidence in June and July. The decline in August reverses all of those gains. The index is still 10.8 points above the recent cycle low in July 2022.
    

     Economists think that higher gasoline prices were behind some of the decline in August. The price of a gallon of unleaded gasoline is up 19.6% from the start of the year and over 2% from last month. 
    

    What the Conference Board said: The organization said it still expects a recession before the end of the year.
    

    “Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular,” said Dana Peterson, chief economist at The Conference Board. 
    

    What are they saying?  “The August drop does not definitively end the upward trend in place since last summer, and the expectations index still points to faster growth in real consumption spending. We are not convinced, however, in part because some of the strength in July retail sales was due to boost from Amazon Prime Day, which won’t continue, and because near-real-time indicators of discretionary services spending paint a much less upbeat picture,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
    

    Robert Frick, corporate economist with Navy Federal Credit Union, said he didn’t think confidence would rise significantly until inflation falls further. 
    

    Market reaction: Stocks
    
        DJIA
    

            SPX
    
       were trading higher on Tuesday. The yield on the 10-year Treasury note
    
        BX:TMUBMUSD10Y
    
       fell to 4.16%. 
    

    

    

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    Jackson Hole recap: Fed rate hikes likely on hold for ‘several meetings’
    
			
    Jackson Hole recap: Fed rate hikes likely on hold for ‘several meetings’
    
			
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    Federal Reserve Chair Jerome Powell set a high bar for additional interest-rate hikes, economists said Sunday in their commentary on all the talk at the U.S. central bank’s summer retreat in Jackson Hole, Wyo.
    

    Michael Feroli, chief U.S. economist for JPMorgan Chase, said that the Fed chair certainly did not give a clear signal that more tightening was coming soon. He noted that Powell stressed the Fed would “proceed carefully” and balance the risks of tightening too much or too little.
    

    

    “We remain comfortable in our view that the FOMC will stay on hold for the next several meetings,” Feroli said.
    

    Read: Powell unsure of need to raise interest rates further
    

    The caveat to this forecast is if inflation surprises to the upside or the labor market does not continue to soften.
    

    Ian Shepherdson, chief economist at Pantheon, said that Powell’s speech seemed hawkish to some, particularly because the Fed chair made threats to hike again.
    

    But Shepherdson said he thought the Fed “is likely done.”
    

    “Behind the caveats, Mr. Powell’s speech fundamentally was optimistic, though cautious,” Shepherdson said.
    

    Boston Fed President Susan Collins also emphasized patience in an interview with MarketWatch on the sidelines of the Jackson Hole summit.
    

    Read: Fed has earned the right to take its time, Collins says
    

    Other regional Fed officials who spoke “hinted that further action may be needed, but also observed that inflation is moving in the right direction and that the surge in yields would help cool down the economy,” said Krishna Guha, vice chairman of Evercore ISI, in a note to clients.
    

    Traders in derivative markets expect a rate hike in November, but it is a close call, with the odds just above 50%. 
    

    The Monday following Jackson Hole has historically been an active one in the markets, across asset classes.
    

    The 10-year Treasury yield
    
        BX:TMUBMUSD10Y
    
       ended last week just above 4.2%. 
    

    Read: Market Snapshot on Powell’s stance
    

    The first test of the careful and patient Fed will come this coming Friday, when the government will release the August employment report. 
    

    Economists surveyed by the Wall Street Journal expect the U.S. economy added 165,000 jobs in the month. That would be the weakest job growth since December 2020.
    

    In his speech on Friday, Powell emphasized that evidence that the labor market was not softening could “call for a monetary policy response.”
    

    Economists at Deutsche Bank think an upside surprise in the employment data could provide enough discomfort for the Fed, and raise expectations for further tightening.
    

    Other top global central bankers spoke at Jackson Hole, including European Central Bank President Christine Lagarde, Bank of Japan Gov. Kazuo Ueda and Bank of England Deputy Governor Ben Broadbent. 
    

    Guha of Evercore said he detected a careful effort by the officials not to surprise markets.
    

    The exception to this rule might have been Bundesbank President Joachim Nagel, who said in a television interview that it was too early for the ECB to think about a rate-hike pause. 
    

    

    

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    Why this abstract concept could rattle stocks when Powell speaks at Jackson Hole
    
			
    Why this abstract concept could rattle stocks when Powell speaks at Jackson Hole
    
			
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    There’s one big, but theoretical, concept that has the potential to shake up the stock market the most on Friday, when Federal Reserve Chairman Jerome Powell is scheduled to deliver a speech at an annual symposium held in Jackson Hole, Wyo.
    

    It has to do with the neutral rate of interest. That’s the level of real short-term interest rates that’s expected to prevail when the U.S. economy is at full strength and inflation is stable. The real neutral rate — known alternatively as r* or r-star— is estimated to be around 0.5%, after subtracting the Fed’s 2% inflation target from policy makers’ latest forecasts for where the fed funds rates is likely to be in the long run. And that neutral rate may be moving higher, given how the economy is performing right now.
    

    Read: Jackson Hole meeting: When is Jerome Powell’s speech? What investors need to know. 
    

    Settling on the right theoretical level for the neutral rate matters because the U.S. economy appears to be accelerating, even after the Fed has hiked rates by more than five full percentage points to a 22-year high of 5.25%-5.5%. The world’s largest economy grew at a solid 2% pace in the first quarter, followed by a 2.4% pace for the second quarter. Now, the Atlanta Fed’s GDPNow model is forecasting a third-quarter growth rate of 5.8% for real gross domestic product — a number that’s drawn plenty of skeptics, but underscores just how well the economy seems to be doing.
    

    See: R-Star Is the New Buzzword. Listen for It at Jackson Hole.
    

    “The notion of a higher r-star or neutral rate has crept its way into the marketplace and has been a hot topic lately,” said Thomas Urano, co-chief investment officer at fixed-income money manager Sage Advisory in Austin, Texas, which oversaw $23 billion as of July. “The market is trying to digest where the Fed views this neutral rate and is looking to get a little more clarity as Powell speaks in Jackson Hole.” 
    

    If the neutral rate is higher than previously thought, that means policy makers might need to hike the fed-funds rate target even further, in addition to holding borrowing costs higher for longer and delaying the timing of their first rate cut.
    

    Traders and investors are well aware that the Fed is likely to keep interest rates higher for longer, and they’ve pushed out their expectations about the timing of the first rate cut next year, according to Dan Eye, chief investment officer for Pennsylvania-based Fort Pitt Capital Group, which manages $4.9 billion in assets.
    

    However, the market is not yet fully positioned for the Fed to put rate hikes back on the table, Eye said via phone on Wednesday.
    

    Dow industrials
    
        DJIA,
    
       the S&P 500
    
        SPX,
    
       and Nasdaq Composite
    
        COMP
    
       are respectively up so far this year by 4.1%, 15.6%, and 31.3% as investors and traders hold out hope for a soft- or no-landing scenario in which the U.S. economy can emerge relatively unscathed as inflation keeps falling.
    

    As of Wednesday afternoon, all three major stock indexes were higher, led by a 1.8% advance in the Nasdaq Composite as investors await a fiscal second-quarter earnings announcement from chip maker Nvidia Corp.
    
        NVDA,
    
        +2.84%
    
       that’s due after the close.
    

    Any remarks by Powell on Friday that can be interpreted as suggesting that more rate hikes are likely to come will produce volatility and “a downdraft in stocks,” Eye said. The best possible outcome for stock investors would be if Powell “stresses data dependency and says that policy makers will continue to consider the cumulative impact of rate hikes that have been done already.” 
    

    The theme of the Kansas City Fed’s Jackson Hole symposium, being held Thursday-Saturday, is “Structural Shifts in the Global Economy,” a topic that’s led to the growing expectation that Powell will address where he and the Fed currently see the neutral rate. 
    

    In the run-up to Friday’s Jackson Hole speech, the Treasury market has already priced in a scenario of better-than-expected U.S. economic growth, with 10- and 30-year yields reaching multiyear highs on Monday and last week. Though both yields pulled back on Tuesday and Wednesday, they could bounce back again if investors sell off long-dated government debt in response to Powell’s remarks, investors said.
    

    The recent rise in yields has been blamed, in part, for August’s decline in U.S. stocks, with the S&P 500 down more than 3% so far this month.
    

    “Powell has to sound hawkish, he cannot afford not to do so” because “any signal that the hiking cycle is done will probably lead to such a bullish response in risk assets that it will loosen broader financial conditions,” said strategist Rikkert Scholten at Rotterdam-based Robeco, which oversees $194 billion. 
    

    Still, Robeco’s investment team also expects the Fed chairman to stress data dependence as a way of “credibly” keeping his options open.
    

    Brad Conger, deputy chief investment officer at Hirtle Callaghan & Co. in West Conshohocken, Penn., which manages $18.5 billion in assets, said he believes the Fed is near the end of its rate-hiking cycle, which began in March 2022. 
    

    Nevertheless, “any discussion about a higher natural rate of interest due to the shifting structure of the economy would set off a bout of uncertainty,” he said. Natural rate is the phrase used to describe where the neutral rate may settle over the longer run.

    

    

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