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What Happened Last Week and What It Means to You: Week Ending August 30, 2024

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Week Ending in August 30, 2024

 

Q2 GDP revised higher due to surge in personal consumption…The Bureau of Economic Analysis (BEA) decided to pull a Bureau of Labor Statistics (BLS) and reported a large increase in GDP in its first revision of Q2 GDP.

While corporate America and companies like Dollar General and Walmart have similar same store revenue growth, they do have very different operations. Dollar General warned that its clientele is significantly constrained due to the economic headwinds and continued increase in inflations. Its CEO, Todd Vasos, acknowledged consumers are being pressured in today’s environment of elevated inflation and high interest rates. He went on to say, “While we believe the softer sales trends are partially attributable to a core customer who feels financially constrained. While Walmart instore same sales where almost identical their online success is a very evident.

What does it mean – Hard to believe. The BEA revised GDP higher. It contradicts almost all other reports from the BLS and the private sector. Along with massive job loss we saw during this period along with continued revised down job growth, it is hard to believe that alone has had no bearing on GDP according to the bean counters in the federal government. Not to mention the continued rise in inflation, slowing housing market coupled with continued slide in manufacturing. HMMMM.

In other words, the economy had to perform to near perfection or a “Six Sigma” performance according to Zerohedge. Unfortunately for the government we already got the reports that showed our economy losing 818,000 jobs, 20 out of 21 quarters of lower manufacturing, and a construction industry bifurcated between well run states with low taxes and the dismal reality of poorly run over taxed and over regulated states like CA, Il, MI, NY, NJ and others. One day the government will realize who they actually work for.

Consumer confidence stalls…While July was revised up, August seems to wane.

What does it mean – According to Briefing.Com, the report shows that consumers are starting to show more concern about labor market conditions. This could eventually translate into lower consumer spending activity if that labor market angst leads to deferred discretionary spending decisions further questioning the report from the BEA.

Nonfarm payrolls increased by a smaller-than-expected…July nonfarm payrolls increased by 114,000.

What does it mean – The unemployment rate increased to 4.3% from 4.1%. The U-6 unemployment rate, which also accounts for underemployed workers, rose to 7.8% from 7.4%. Again, the numbers do not add up to the recent reports from BLS and BEA.

It is harder to find work…According to the U.S. Conference Board, finding work is getting difficult.

What does it mean – According to the Federal Reserve’s own numbers, manufacturing jobs have been on the decline for most of 2024. While manufacturing is only one key indicator in the economy, we have also seen a massive shortage or lack of hiring in the hospitality and hotel industry along with construction. Again, a sharp contrast to what the BEA is telling us. Throughout the country per the charts below.

 

Job hopping has become less lucrative…As the economy continues to struggle job switching has become far more difficult and is starting to put pressure on wages.

What does it mean – According to the chart below and the numbers from Bloomberg, during COVID we saw wages jump dramatically for those willing to shift from employer to employer. So much so, we started a new term for folks who constantly where seeking “greener pasture”. Employers and the Fed began to label them as job switchers. I am sure the fact that many had been working from home and the fact that many companies benefited from massive infusions from government funding of COVID, employees held the upper hand.

Now that the economy has slowed, job switching, and wages are slowing dramatically further bringing into question the BEA and BLA statistics.

It could also be said that due to COVID and the massive relief government gave to companies led to over hiring and now companies are dealing with more bodies than they need. This false sense of security has led to much uncertainty and fear and many employees are now facing the reality of having to head back to work and compete for what was once a secure job but now may be seen as unnecessary to the employer. Here is a look at the latest chart from the Conference Board.

Average U.S. Family sees more pain ahead…The Current Family Financial Situation continues to flounder.

What does it mean – According to the Conference Board American Families are in more debt or eating into savings at a faster rate than normal. Due to rising inflation and higher interest rates, the average American is struggling.

Mortgage rates are down…According to the Mortgage Bankers Association conforming mortgage rates just hit 6.44%.

What does it mean – It means conforming rates are now down nearly 1.5% from their peak nearly a year ago.

Unfortunately, not even the Fed setting expectations for rates to fall and trying to talk down rates has helped the purchase market. At this time, mortgage purchase applications are still trailing previous years. Here is a great view of the actual volume showing that we have been down over 35% throughout 2024 as compared to historical averages.

The ISM Manufacturing PMI continues to soften…A further indication of continued contraction in US factory activity in August.

What does it mean – Manufacturing is a key component to our economy. It is hard to imagine robust growth without a pickup in manufacturing.

SuperCore PCE rose 0.2% MoM… This was the 51st straight monthly rise in SuperCore prices with virtually all costs except transportation rising.

What does it mean – While the rate of inflation is slowing, the compounding effect on the economy is stifling. Lowering interest rates may help asset prices in the short run. But the real issue is government handouts and spending. See the charts below.

Eight straight month of rising government handouts…Since December of 2023 government transfer payments and social benefits have increased significantly.

What does it mean – Per the chart below we see a considerable increase in transfer payments or social programs over the last 8 months. Besides being an election year, one must wonder how this is possible as we are running a deficit of over $1.8 trillion per year.

We are an optimistic bunch.

Let’s roll America!!!

Doug De Groote, CFP®, MBA, CTC
Managing Director

De Groote Financial Group, LLC is a federally registered investment adviser that maintains a principal office in the State of California. The information contained in this message is confidential, protected from disclosure and may be legally privileged. If the reader of this message is not the intended recipient or an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any disclosure, distribution, copying, or any action taken or action omitted in reliance on it, is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by replying to this message and destroy the material in its entirety, whether in electronic or hard copy format.

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Jeannie Ewing-Nicholson

Operations Manager

Jeannie started her career in the Financial Services industry in 1994 with Oppenheimer & Company. As part of the De Groote Financial Group, Jeannie is responsible for the operational needs of the firm including cash management and account administration. With her upbeat attitude and attention to detail, Jeannie provides an efficient streamlines experience to ensure clients meet their goals. Jeannie enjoys travel, outdoor activities, Pilates, and is a football and basketball fan. She resides in Westlake Village with her husband, daughter and son.

Mary-Ellen Lykken

Executive Assistant

Mary-Ellen, Executive Assistant at DFG, keeps the office running smoothly by providing administrative support and assisting with scheduling and organization. With a background in human resource and office management, Mary-Ellen comes from the non-profit and services industries.

Outside of the office, Mary-Ellen is committed to the advancement of independence and productivity for those with disabilities. By telling her story of the challenges and joys of raising a child with complicated disabilities, she hopes to help others navigate similar circumstances.

She is happiest when visiting her two grown sons. Otherwise, you can find her competing on the pickleball courts.

Sara Mariniello

Operations Manager

Sara is new to the financial industry only starting in 2022 when she was hired at De Groote Financial. As Operations Manager, Sara is responsible for all the paperwork surrounding opening accounts and investment paperwork and is also responsible for much of the client communication. Sara has her bachelor’s in science and nursing from Concordia University, Texas and worked as nurse for over a year prior to moving back to California. She loves all things sports and church related and is likely spending every free moment with her Husband visiting family in Texas and New Jersey.

Fadi Ahmed

Chief Operations Officer and Chief Compliance Officer

Fadi works with clients to ensure an exceptional experience. He coordinates and assures the planning process and wealth management tools are at your fingertips to provide the clarity you deserve and the transparency and access to all your accounts. Fadi ensures the data and information is reflective in our planning software. All changes and updates flow through his desk and he coordinates those changes with the rest of our team.

Andrew Krout

Wealth Advisor, Co-Chief Investment Officer

Andrew Krout is a Wealth Advisor at De Groote Financial Group, LLC. He also serves as a Co-Chief Investment Officer for the firm, focused on wealth management.

Previously, Andrew served as CIO with Kelly Financial in Boston Massachusetts since 2013. He is a licensed investment advisor representative and insurance producer. He graduated from Saint Francis University with a bachelor’s degree in both finance and accounting. He is a candidate for CERTIFIED FINANCIAL PLANNER™ designation. Andrew holds life insurance licenses in Massachusetts, New Hampshire and Connecticut.

Andrew is passionate about serving his clients and investment management and how to apply news and current events to investment decisions. He played Division 1 golf in college, and still enjoys playing and watching the sport in his free time.

David Darst

Co-Chief Information Officer

David Martin Darst, CFA is an Investment Advisor to DeGroote Financial Group, specializing in asset allocation and product selection. Previously, David served for 17 years as a Managing Director and Chief Investment Strategist at Morgan Stanley Wealth Management, with the responsibility for Asset Allocation and Investment Strategy. He joined Morgan Stanley in 1996 from Goldman Sachs, where he held Senior Management Posts within the Equities Division and earlier, for six years as Resident Manager of their Private Bank in Zurich.

David is the author of 13 books, including bestsellers The Art of Asset Allocation, 2nd Edition (McGraw-Hill), and The Little Book that Still Saves Your Assets (John Wiley & Sons). He also appears as a frequent guest on CNBC, Bloomberg, FOX, PBS, and others, and has contributed articles across a variety of publications.

David graduated with a BA in Economics from Yale University, and earned his MBA from Harvard Business School. He has lectured extensively at Wharton, Columbia, INSEAD, and New York University Business Schools, and for nine years, David served as a visiting member at Yale College, Yale School of Management, and Harvard Business School. He is a CFA Charterholder and a member of the New York Society of Security Analysts and the CFA Institute. 

Doug De Groote

Managing Director

Doug is a Certified Financial Planner™ (CFP®) with an MBA in Financial Planning, and is an active member of the Financial Planning Association (FPA). Before establishing De Groote Financial Group, Doug founded the United Wealth Management division of United Capital. Prior to that, Doug was a partner at Crowell, Weedon and Co. He regularly contributes to a variety of financial and general media.

Doug’s passion, and what he believes, is that everyone deserves the opportunity; they deserve to have the freedom and responsibility to be pro-active in achieving independence and financial success.

Doug’s life is focused around his family, wife and three children, and making sure they get the foundation that is necessary for them to have the awareness of the opportunities that abound in our great country.

Doug helps increase his client’s awareness and success, to identify and take advantage of opportunities that present themselves and help protect them from some of the pitfalls or obstacles that are thrown in our paths. With regards to their financial circumstances, Doug helps his clients identify their goals, plan for various outcomes and manage their assets to help them make their vision a reality.