The US economy has kept growing, though at a slower rate, and employers have kept hiring. In May, the nation added a strong 272,000 jobs, although the unemployment rate edged up for a second straight month, to a still low 4%. At the same time, overall inflation has tumbled from a peak of 9.1% in 2022 to 3.3% (core CPI at 2.6%, excluding food and energy)in May, still above the Fed’s 2% target level. The government’s latest estimate of first-quarter annual GDP growth was lifted slightly to a lackluster 1.4%.

Inflation and expectation on Fed rate cuts:

The current U.S. inflation rate is 3.3% for the 12-month period leading up to May 2024. A 3.3% inflation rate may not seem like a lot. But to put inflation in context over the last few years, consumer price inflation rose 21.75% between January 2020 and May 2024, and stubbornly high housing costs persist.

Earlier in 2024, economists were expecting at least six rate cuts this year; they are now pricing in just two, starting in September. Fed officials at their June meeting penciled in just one reduction this year.

Presidential debate and what to expect for the economy?

In Thursday night’s presidential debate, both Biden and Trump attempted to portray their time in office as economically more favorable for voters. Setting aside how painful it was to watch the debate, regardless of which side you are on, the outcome of the presidential race could have a big impact on the economy.

Voters are concerned about issues like inflation and home prices ahead of the presidential election. Trump’s economic policies rest on lowering taxes on wealthy individuals, increasing tariffs on imported goods, removing income taxes on tips, and a mixed message on immigration that promises both mass deportations and automatic green cards for immigrants with a college degree. For Biden, while Inflation has come down substantially from its 9% peak in the summer of 2022 to a little over 3% now, it is the cumulative effect of the price increases that have stuck in the minds of most voters. Both have presided over a sharp increase in spending, with Trump approving $8.8 Trillion of new spending in his term and Biden so far approving $6.2 Trillion.

How is the interest rate doing and its effect on the housing sector?

The housing sector has hit a wall with mortgage rates hovering around 7% for a 30-year fixed rate loan and prices at an all-time high. Existing homeowners have been reluctant to ditch their sub-4% mortgages and put their houses up for sale while prospective homebuyers are priced out of the market. New single family home sales dropped by 11.3% and the median price of a new home also dropped in May.

What is happening with Nvidia’s phenomenal stock rise?

In the months since the end of 2022, Nvidia has gained US$2.8T in market cap—more than 10% of US GDP … To put this into perspective, in the 18 months between the beginning of 1999 and mid-2000, the entire global tech industry added US$3.5T in market capitalization. So, in the past 18 months, Nvidia has single-handedly matched 80% of the global dot com bubble at the end of the 20th century. There is no question about broader potential of AI technology and its eventual impact on labor productivity. Nvidia will produce such a massive cash that it will have to buy back more stock because all that money has nowhere else to go. At One15Capital, we will continue to follow this stock very closely.

Disclaimer
This work has been based on secondary market research. We have not independently verified this information and make no representation or warranty, express or implied, that such information is accurate or complete.