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We’re diving head-first into this week’s market waves. Check it:
Last week, stock markets dipped slightly, while bond markets gained from lower Treasury yields. The S&P 500 remains strong, up nearly 25% since late October, without a significant pullback.
Market analysts are still anticipating a potential short-term consolidation in equity markets but don't foresee a major downturn.
Recent statistics have shown a slight uptick in the unemployment rate, reaching its highest in two years, with the nonfarm-jobs report indicating early signs of a cooling labor market.
Wage growth has also entered a phase of moderation, with average hourly earnings decelerating from 4.5% to 4.3% year-over-year in February.
While this might initially sound like storm clouds are gathering, there is a silver lining. The cooling indicates the is market moving from the feverish pace of job additions towards a more sustainable growth trajectory—a scenario that can lead to more stable economic conditions and potentially reduce wage inflation pressures.
Indications from the Fed suggest a readiness to adjust interest rates in response to these labor market signals, with potential cuts later in the year, possibly starting around June.
Federal Reserve Chair Jerome Powell told us during his testimony to Congress last week that the Fed is "not far" from gaining the confidence it needs to begin a rate-cutting cycle.
According to the latest Cox Automotive Dealer Sentiment Index (CADSI), when asked about the factors holding back their business, U.S. auto dealers listed Interest Rates, the Economy, and Market Conditions as the primary culprits.
Though Interest Rates held as the #1 issue holding back both franchised and independent dealer businesses, it did show a modest 3% decline, down from 65% in Q4 2023.
The latest findings from Widewail's 2024 Brand Scorecard Report are now available, offering a revealing snapshot of the online reputations of the nation's most popular automakers. This year, the report meticulously analyzed 32 leading automotive brands to gauge their standing with consumers.
To no one’s surprise, Toyota/Lexus topped the list. Lincoln and Genesis brought up the caboose.
Kelley Blue Book interviewed more than 5,000 car shoppers to understand their journey, separating the results into Gen Z, Millienials, Gen X, and Baby Boomers.
According to the research, members of Gen Z (those born between 1996 and 2005) are less likely to know what models they’ll consider when they start shopping, but they spend more time researching and are more likely to use third-party websites to gather information.
Just 24% of Gen Z buyers agreed that they knew exactly which vehicle they wanted when they started shopping. That predetermination grows with age, with 26% of Millennials, 28% of Gen Xers, and 38% of Boomers going into the process with their minds made up.
Entering the shopping process undecided leads to more research time among the young. Gen Z buyers spent 147 days on average researching and shopping. Millennials spent 112. Gen X spent 122. Boomers – the most experienced in the process – decided in just 84 days.
The youngest buyers were the most likely to research through third-party sites, with 89% of Gen Z relying on independent research websites for information, compared to 66% of Boomers. But that may reflect a bent toward online research of all kinds – they were also the most likely group to have visited a manufacturer’s website.
Dealer sites were the least favored among all four generations. YIKES!
February saw new-vehicle transaction pricess in the U.S. slightly decrease to an average of $47,244, down 2.2% from the previous year and 5.4% from the December 2022 peak. Despite the minor decrease, prices remain 14% higher compared to February 2021.
A significant inventory increase to 2.61M units (up 50% from last year) along with higher incentives averaging 5.9% of the transaction price, have been contributing to robust sales momentum. This combination is keeping 2024 on track for the strongest new vehicle sales year since 2019.
Though it is easing, affordability remains an issue for many buyers. A shift towards more expensive luxury models and EVs has reduced the availability of lower-priced options, with only nine of the roughly 275 different models available in the U.S. market priced below $25,000.
Dealers say they are also seeing an overall decline in traffic and profits indexes from the previous quarter. The overall profits index hit an all-time high of 60 in Q3 2021 and has been sliding ever since and currently sitting at 37.
For franchised dealers, the profits index sunk to 51, down seven points quarter over quarter. The profits index for independent dealers at 32 marks the ninth consecutive quarter of a below-50 index reading.