US investors have a lot to digest this week, including the highly anticipated August Consumer Price Index (CPI) on Wednesday. Investor fears about inflation staying higher for longer have moved to the forefront as of late, particularly with oil prices back in the $90 range.

Wall Street insiders mostly expect the Federal Reserve will keep rates "unchanged" at its upcoming meeting next week (September 19-20). Odds that the Fed raises by +25 basis-points at its November meeting have risen to around 42% versus about 28% just a month ago.

Still, very few see more than one final +25-point hike happening this year. The bigger debate is when the Fed might begin cutting rates and those expectations are beginning to get pushed further out into the back-half of 2024 or perhaps even not until 2025 as data indicates that inflation is still simmering.

Obviously, the longer inflation remains elevated, the longer the Fed will feel compelled to hold rates higher, something traders and investors say will eventually start to bite both economic and earnings growth.

According to the Fed's most recent Senior Loan Officer Opinion Survey, more than half of banks tightened lending standards for businesses in Q2 and most expected to continue tightening credit through the rest of 2023.

At the consumer level, data on Friday showed total consumer borrowing slowed sharply in July to +$10.4 billion versus an increase of +$14 billion in June. The increase in July was driven mostly by increased revolving credit, which includes credit card debt, and climbed $9.6 billion after declining the previous month. That is still pretty subdued growth, though, and consumer credit card balances aren't at alarming levels compared to incomes.

At the same time, slow credit growth does raise some worries about the outlook for consumer spending in the months ahead, especially heading into the all-important holiday season.

Typically, a slowdown in consumer credit precedes a slowdown in consumer spending - growth in July was less than half what it was in April ($22.3 billion). There is no economic data on the calendar today.

On the earnings front, investors are anxious to see results from Casey's and Oracle which reports after markets close today.

Other events on investor radar this week include Apple's iPhone launch event on Tuesday, the European Central Bank's policy decision on Wednesday, the expiration of the UAW contract and possible autoworkers strike on Thursday, as well as key Chinese economic data overnight on Thursday.

Companies Are Paying More to Borrow in a Record Bond Rush: Large companies with top credit ratings issued bonds at a record clip this week despite a rise in Treasury yields that sent borrowing costs to a roughly 15-year high. Nineteen companies last week sold 47 bond tranches in the U.S. investment-grade market, according to PitchBook, a record since the data provider began tracking deals in 2012. Duke Energy, Southern Co., and Philip Morris International were among the borrowers. Tuesday’s bond sales totaled almost $38 billion and it was the best sales day since April 2020 when the Federal Reserve had cut rates to near-zero. High-grade firms paid an average of 5.7% to borrow this week, a level many haven’t paid since the global financial crisis. Resigned that interest rates are heading higher, borrowers are locking in funding now ahead of any further uncertainty from central-bank meetings or unexpected events that could disrupt the flow of credit. Keep in mind that the higher interest costs will cut into profits in the coming years and at the same time hit some firms with lower credit ratings. Source WSJ

India’s ‘Massive Expansion’ Set to be a Key Driver of Global Economic Growth: India’s stellar economic trajectory alongside strong forecasts for some Southeast Asian countries will be important drivers for global growth, said S&P Global Insights. Asia-Pacific is a key driver for global economic growth not just in the near term, but over the longer run as well, S&P Global’s Asia-Pacific chief economist Rajiv Biswas said at the annual energy APPEC conference. When we look over the next decade, we do expect Asia-Pacific to be the fastest growing region of the world economy, he said, noting key bright spots include India, Indonesia, the Philippines and Vietnam. Vietnam’s second-quarter GDP growth rose 4.14% from a year ago, faster than 3.28% growth in the first quarter. Southeast Asia’s biggest economy Indonesia expanded 5.17% year on year in the June quarter. India’s economy grew 7.8% in the June quarter, marking the fastest pace of growth in a year and will surpass Japan to become the third largest economy by 2030, with the country’s GDP projected to rise from $3.5 trillion in 2022 to $7.3 trillion by 2030 according to Biswas. Source CNBC

Apartment Rents on the Verge of Decline Due to Massive New Supply: Apartment rents have been cooling off sharply for several months, and they look like they’re about to go negative compared with a year ago. Apartment occupancies nationally are at a pretty healthy 94%, which is right along historical norms. High mortgage rates combined with high home prices and tight supply have kept more would-be buyers in the rental market. The issue instead is just a massive amount of apartment supply. The number of new units being built is at a 50-year high, with more than +460,000 new apartments being completed this year alone. Over a million new units have been built in the past three years, a record. While rents nationally haven’t gone negative yet, they have in several local markets. Austin, Texas (-4.9%), Phoenix (-4.9%), Las Vegas (-4.7%), Atlanta (-3.7%) and Jacksonville, Florida (-3.4%) are seeing the biggest drops. The Midwest and Northeast regions continue to see very strong rent increases. Source CNBC

Brief UAW Strike Will Cause Billions in US Economic Damage: A strike against General Motors, Ford and Stellantis is getting very close. The current UAW contracts expire at 11:59 p.m. on Thursday, meaning a full-clown strike could happen as soon as Friday and could reduce US gross domestic product by -$5.6 billion and likely push the Michigan economy into a recession, according to Anderson Economic Group, an economic consultancy based in Lansing, Mich. It could also make some car models scarce and push prices up after they started coming down from record levels. “If we were to have a long strike in 2023, the state of Michigan and parts of the Midwest would go into a recession,” said Patrick Anderson, chief executive officer of Anderson Economic, which counts GM and Ford among its clients. “When GM workers went on strike in 2019, you saw gross state product drop in Michigan in the fourth quarter, while in the rest of the country it was largely unaffected. That won’t be the case this time if the UAW goes through on its threat to strike at all three companies.” Of the $5.6 billion in economic impact, lost worker pay would come to $859 million and lost automaker earnings would be $989 million, Anderson said. The rest would come from layoffs and lost business at parts makers and other industries that rely on the three automakers. Source Bloomberg

China's Currency Hits Nearly 16-Year Lows: China's tightly managed currency fell to the lowest level against the US dollar in almost 16 years last week. The weakness of the currency reflects the growing consensus that the world's second-largest economy and biggest single driver of global economic growth for decades is in economic trouble. And with the economy looking weak, speculators appear to be betting against the yuan. Besides trade and economic conditions, currency values are heavily influenced by "interest rate differentials," or big gaps between where central banks in different countries set the short-term rates they use to control monetary policy. In what's known as a carry trade, speculators borrow money in the low-rate or funding currency. Then they convert that money to the currency of a country where interest rates are higher and use it to invest in something with a higher yield. With expectations of more monetary policy easing, the yuan is likely to remain an attractive funding currency for carry trades, wrote Goldman Sachs analysts, adding that hedge fund investors have shown rising interest in riding the waves. Source Axios

The first attack took place at 7:14 am CST on Tuesday, September 11, 2001. Most of us can remember exactly where we were when the news first aired, the panic to talk to our loved ones, and the uneasy feeling that spread through our bodies regardless of our proximity to the actual events.

At times, I think about those who lost their lives on that horrific September 11th morning. I also think about all of those who have lost their lives since, sacrificing for our country in an effort to keep our families safe.

I have to imagine all of those who have sacrificed would tell us to make certain we are enjoying the journey each and every day and to always tell those we love just how much.

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