As summer draws to a close, market and economic indicators continue to paint a mixed picture. Some sectors are showing modest signs of stabilization, while others remain under pressure. At Finley Davis Private Wealth, we are honored to share that we were recently named Best Financial Planning Firm in Eugene, recognized for our dedication to business owners and our commitment to helping them access the information they need to optimize both their business structures and long-term profits.
Below is a snapshot of key developments and what they could mean for business leaders planning for the months ahead.
Job Growth Slows Sharply
Key Market Indicator
The Bureau of Labor Statistics reported nonfarm payroll additions of just +22,000 in August, well below the six-month moving average of +64,000 and consensus expectations of +75,000. The unemployment rate edged up to 4.3%.
Why It Matters
A notable slowdown in hiring suggests the labor market may be cooling. For employers, this could ease some wage pressures, but it may also indicate caution among businesses. Leaders may want to review workforce needs carefully, balancing efficiency with the ability to scale when growth opportunities arise.
Yield Curve Remains Slightly Normal
Key Market Indicator
The U.S. Treasury yield curve (10-year minus 2-year) stands at +56 basis points, reflecting a slightly normal curve. Normalization year-to-date has been driven by short-term rates falling more than long-term rates. The MOVE Index, which tracks bond market volatility, remains quiet at 85, below its long-term average of 94.
Why It Matters
A quieter bond market and a more normal yield curve may support borrowing and capital planning. For companies considering refinancing or funding new projects, the current environment may offer an opportunity for more predictable cost structures.
Leading Indicators Show Gradual Progress
Key Market Indicator
The Conference Board’s Leading Economic Index (LEI) rose slightly in July, improving from -4.0% to -3.6% year-over-year. Although still in contraction, the LEI has trended more positively since bottoming out in April 2023.
Why It Matters
The LEI remains negative but is moving toward stability. This may signal that broad economic conditions are entering a slower, steadier phase. Businesses may benefit from building flexibility into plans while preparing for gradual shifts in demand.
Services Sector Expands for Third Month
Key Market Indicator
The ISM Services PMI for August registered 52.0, above the consensus of 51.0. Twelve industries reported growth while four reported contraction.
Why It Matters
A reading above 50 indicates expansion. For service-based businesses, steady growth may point to continued demand. Leaders should remain mindful of sector-specific trends, but overall conditions appear constructive for service industries.
Manufacturing Contracts Again
Key Market Indicator
The ISM Manufacturing PMI came in at 48.7 for August, slightly below consensus expectations of 49.0. This marks the sixth consecutive month of contraction following a brief two-month expansion. Seven industries reported growth, while ten reported contraction.
Why It Matters
Manufacturing continues to struggle, reflecting weaker demand and possible global pressures. Companies tied to supply chains may want to monitor inventory management and cost structures closely to remain resilient if contraction persists.
Housing Market Mixed
Key Market Indicator
The National Association of Realtors reported pending home sales were +0.3% year-over-year in July. Three of four U.S. regions saw monthly declines, with the West as the only region posting growth. The average 30-year mortgage rate is 6.6%.
Why It Matters
Housing activity remains uneven under the weight of higher interest rates. Real estate investors and related businesses may want to track regional variations closely and adjust strategies around timing, inventory, or capital deployment.
Investor Sentiment Neutralizes
Key Market Indicator
The AAII Sentiment Survey showed investors at 32.7% bullish and 43.4% bearish, for a spread of -10.7% (bearish). The CNN Fear and Greed Index registered 53 (“neutral”), slightly down from 55 (“greed”) one month ago.
Why It Matters
Shifts in sentiment reflect cautious investor outlooks. While not an immediate predictor of market moves, sentiment can influence liquidity and valuations. Business leaders considering fundraising, investment, or exit opportunities may benefit from factoring in this more balanced outlook.
All data sourced from Bloomberg unless otherwise indicated.
Actionable Takeaways
- Revisit Cash Flow Forecasting
With job growth slowing and mixed sector performance, business owners may want to stress-test cash flow under different revenue scenarios. Building in reserves can provide flexibility if the broader economy softens further. - Explore Financing Windows Before Year-End
The quieter bond market and normalizing yield curve may create opportunities to secure funding on favorable terms. Businesses planning expansions, acquisitions, or equipment purchases may benefit from acting before volatility picks up. - Diversify Revenue Streams Where Possible
The contrast between services growth and manufacturing weakness highlights the value of diversification. Owners with concentrated exposure to one industry may want to consider complementary offerings or strategic partnerships. - Monitor Housing and Real Estate Links
Even modest changes in housing activity can ripple into related industries, like construction, professional services, and consumer goods. Businesses tied to real estate cycles should adjust projections and inventories region by region. - Stay Opportunistic Amid Cautious Sentiment
With investor sentiment balanced between caution and neutrality, buyers and investors may be more selective. This can present opportunities for disciplined acquirers or firms seeking talent, capital, or market share at more reasonable valuations.
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