Here are the economic and market highlights for the week:
- Consumer price growth continued to ease in August, rising just 0.20% for the month, and higher by 2.50% on a year-over-year basis. This was a significant deceleration with the YOY reading declining 0.40% from July’s YOY reading, marking the lowest level observed since February 2021. Core prices, which exclude volatile food and energy prices, rose 0.30% for the month. That was slightly higher than the 0.20% estimate but the increase was driven in large part by a 0.50% rise in shelter costs, bringing the yoy gain for that component to 5.20%. Meanwhile, August’s Producer Price Index also provided signs of additional cooling. Wholesale prices rose 0.20% month-to-month. On an annualized basis, prices were up a modest 1.70%. Excluding food and energy, producer prices increased 0.30%, slightly hotter than the 0.20% estimate.
- Consumer sentiment rose to a 5-month high as expectations for future inflation fell to a four-year low. The consumer sentiment index increased to 69.1 in September from August’s reading of 67.9. Inflation expectations meanwhile eased to 2.70% for next year, registering their lowest level since the end of 2020. Inflation expectations have now fallen for four months in a row. The outlook for the economy also brightened with the index of consumer expectations rising to 73.0 in September from 72.1 the previous month.
Big Cap Tech Rallies to Lead Markets Higher
Mega cap tech came roaring back this week as investors took advantage of the recent swoon to buy the dip. AI darling Nvidia led the rally on CEO Jensen Huang’s comments at Goldman Sachs’ Communacopia + Technology Conference. Huang said he is seeing “incredible” demand and that “everything is sold out,” as customers clamor for Nvidia infrastructure to support all things AI. Fed interest rate cuts were also top of mind for investors as they look ahead to next week’s FOMC meeting. Markets initially plunged on Wednesday as August’s core CPI index came in hotter than expected, dashing investor hopes for a 0.50% central bank cut. At its low, investors had sent the Dow Jones Industrial Average down as much as 743.89 points. However, cooler heads had prevailed by the close of trading with the index rallying to finish the trading session higher by 124.75 points. Investors ultimately grew content with the notion that it will be a 0.25% cut when the Fed meeting concludes on September 18th. For the week, all three major indices finished higher with the tech heavy Nasdaq leading the way, up 5.95%.
All eyes are now on the much anticipated September Fed meeting and their first expected rate cut since 2020. Markets have been eagerly awaiting lower rates for well over a year. Although investors have been clamoring for aggressive central bank cuts, economic data does not lend itself to an ultra-dovish Fed. Core inflation remains sticky and the labor market – although softening – has yet to alleviate wage pressures. Fed Committee hawks are sure to point to these two data points as reason to remain data dependent and to move cautiously with rate cuts. Until markets get better clarity on the Fed’s next move and with September being seasonally weak, we’d expect markets will continue to exhibit volatility with an upward bias if for no other reason than there is a tremendous amount of cash sitting in money markets that will start seeking a new home as rates fall.
The Week Ahead
A big week ahead with the September Fed Meeting, retail sales, and existing home sales all on deck.
Retirement Relocation: Finding the Perfect Place to Call Home
One of the many wonderful benefits that retirement may offer is the opportunity to choose where to live once you no longer have a job tying you to a particular area. Retirement was the fastest-growing reason people gave for moving last year, according to a report from Hire A Helper, an online marketplace for moving services, increasing by nearly twice the rate of job-related moves and more than four times the rate of people seeking cheaper housing. In 2023, more than 338,000 U.S. residents relocated to new homes upon retirement, marking a 44% rise from the previous year and the largest number in three years.
Many workers are viewing retirement as an opportunity to relocate to a place that offers better weather, closer proximity to family, more opportunities to stay active and pursue hobbies, or that has a lower cost of living or lower taxes. Below is an overview of some factors to consider when determining the ideal retirement spot.
Cost of living
A study conducted last year by Vanguard showed that 60% of retirees who move are those who sell a home in a high-priced market and move to a cheaper locale. For many homeowners, the profits on the sale of their home will be tax free. The primary residence exclusion can exempt as much as $500,000 of net profit from capital gains tax for married couples filing jointly, or $250,000 for all other taxpayers. Selecting a location with a lower cost of living could enhance financial freedom by stretching retirement funds further.
Taxes
Some states have tax structures that are friendlier to retirees. For example, there is no state income tax in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, which means no tax on income from pensions, Social Security, and IRA and 401(k) withdrawals. (New Hampshire does tax dividends and interest.) Other states offer specific tax breaks for older residents, and some retirement destinations may have favorable property, sales, and estate and inheritance tax rates. Evaluating a state’s tax landscape for retirees will help determine if a particular retirement location aligns with your goals and your finances.
Climate
Weather may directly affect overall enjoyment, comfort, and wellbeing, so choosing a climate that suits your preferences can enhance your quality of life. Many retirees choose warmer or more moderate climates to avoid extreme temperatures and the challenges that come with navigating harsh weather.
Healthcare
During the early retirement years, there may not be a need for medical services beyond routine doctor visits. But when evaluating a retirement locale, the availability and location of good doctors and quality hospitals along with desirable assisted living facilities and nursing homes is an important consideration.
Safety
Crime rates vary widely from city to city, and also within different neighborhoods of a city, so examining crime statistics and economic data for places you are considering for retirement can help ensure you feel safe and secure in your community. A good job market can help keep the area where you choose to live vibrant with low crime rates and also help maintain property values. Examining employment figures and the economic health of a region can provide insight into its current and future security and stability.
Amenities to support your everyday enjoyment and desired lifestyle
Being in close proximity to favorite grocery stores, a coffee shop, movie theaters, art galleries, museums, farmers’ markets, adult education classes, restaurants, a church of your denomination, hiking trails, or golf courses may help your new location feel more like home and help retirees stay active and involved in their community. It is also good to know what types of senior activity centers, clubs, and organizations exist in the community you are considering.
Proximity to a major airport
If you plan to travel during retirement or plan to have friends and family visit you, living within a reasonable distance of an airport with regular flights to destinations that are important to you might be something to consider. Having to drive several hours in addition to the time spent on an airplane can make travel more tedious and expensive.
Moving to a new location after retirement is an exciting opportunity that can mark the start of a fulfilling new chapter. However, it warrants thoughtful research and a clear vision of your retirement goals to ensure you make the best decision for your future.