Money For the Rest of Us

Why the Market Has Sold Off and What Should You Do

Aug 7, 2024

The podcast dives into the recent stock market decline and its ties to disappointing employment reports and the Japanese yen's impact. It explores recession risks through key economic indicators like PMI data, revealing shifts in manufacturing and services. Listeners gain insights on the Federal Reserve's possible policy rate cuts and how rising mortgage rates are reshaping the housing market. The discussion also covers the shift from large cap growth to small cap value stocks, emphasizing the need for adaptive investment strategies.

27:44

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Quick takeaways

The recent market declines stemmed from mixed economic signals, particularly highlighted by a disappointing U.S. jobs report raising recession fears.

Despite temporary market turbulence, leading economic indicators suggest a cautiously optimistic outlook for the U.S. economy and employment growth.

Deep dives

Market Reactions to Economic Indicators

Recent drops in the stock markets, particularly the significant decline in the Japanese stock market, were influenced by mixed economic signals. A weaker-than-expected US jobs report raised fears of a potential recession, prompting concerns among investors about their portfolios and retirement plans. The unemployment rate in the US increased to 4.3%, alongside the triggering of the SOM rule, which has historically predicted recessions. However, it is noted that while the unemployment rate has risen, the overall labor force and total employment figures are also increasing, suggesting the economy is not as weak as indicated by just one month's data.

Economic Signals Indicate Caution

00:36

Intro

2min

Analyzing Market Turmoil: Employment Reports and Economic Indicators

5min

Understanding Market Trends and Economic Indicators

2min

Economic Indicators and Future Outlook

8min

Navigating the Housing and Investment Landscape

13min

In episode 489, we examine three factors that contributed to this week's big stock market declines, analyze whether a recession is imminent, and review David's recent portfolio changes.

Topics covered include:

The benefits of looking at market and economic trends monthly
How bad was the recent U.S. employment report and what is the Sahm Rule
What are leading economic indicators saying about recession risk
Why the Federal Reserve will be lowering its policy rate, leading to lower cash yields
Why the Japanese yen strengthened, leading to market turmoil
Why investors are rotating from large cap growth to small cap value stocks
How David locked in higher yields

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Show Notes

Transcript of Chair Powell’s FOMC Press Conference July 31, 2024—The Federal Reserve

Goolsbee Says Fed Won’t Overreact to One Month’s Data by Catarina Saraiva and Ananya Chag—Bloomberg

Congressional Budget Office Updates Baseline: Deficit Spending is 27 Percent Higher Than Previously Estimated—U.S. House Budget Committee