Good Monday AM,

I hope you made it through a hot, hot weekend without too much of a problem (like ac’s going out which is a typical hottest day of the year cruel joke).

There is not much/any economic data out today and with that, bonds are flattish so far. The 10-yr is at 3.84% and I was happier at 3.78% last Thursday. As the economic data picks up tomorrow with Retail sales, Capacity Utilization, Industrial Production, and the builders index, we will see some volatility pick up as well and rates will get pushed one way or the other. I do not want to say this too loud and anger the bond gods but, market’s expectations for retail sales seem lofty. Markets are looking for .5% on the total and .3% in core, increases. I think those are going to be tough to get to (especially considering student loan repayments are starting in September) and if the data fall short of expectations, rates should improve. I could be, and often am, completely wrong. It is a hunch and therefore a gamble. The Fed meets next week and we will see what the build up is before then. I would still anticipate one more rate hike however, not only are bond prices improving based on expectation the Fed will be done hiking, but the USD is now fading from its highs signaling the cost of a dollar is going down. This will help our exports.

As rough as it can feel economically in the US, does it feel better knowing that all of Europe is faring worse? Their cost of living is going up and their quality of living is going down. Reports out today show that US income is now outpacing inflation. Sounds like a great headline but wage increases are subsiding.. inflation is the moving target and it has been coming down steadily and far quicker than wages have been going up.

Economists are dialing back recession risks. Easing inflation, a still-strong labor market and economic resilience led business and academic economists polled by The Wall Street Journal to lower the probability of a U.S. recession in the next 12 months to 54% from 61% in the prior two surveys. While that probability is still high by historical comparison, it represents the largest month-over-month percentage-point drop since August 2020, as the economy was recovering from a short but sharp recession induced by the Covid-19 pandemic.

Nearly 60% of economists said their main reason for optimism about the economic outlook is their expectation that inflation will continue to slow.

Please remain safe and stay healthy, make today great.