Market Matters

After a 25% six-month surge in the S&P 500, markets have begun to soften, with the S&P 500 and tech-heavy Nasdaq experiencing declines for three and four weeks respectively. Some of key factors influencing this shift include:

• Interest Rates: Expectations have shifted to a "higher for longer" scenario with only one rate cut anticipated in 2024.
• Geopolitical Tensions: Increasing conflicts in the Middle East have escalated oil and commodity prices, heightening market volatility.
• Earnings Season: Though S&P 500 companies are beating earnings forecasts, softer future outlooks and upcoming reports from tech giants like Microsoft, Google, and Meta are being watched closely for signs of weakness.

As inflation relentlessly nibbles away at American budgets, the nation’s collective credit card debt has surged past the $1T mile-marker. Who’s managing to save in this economy?

• Age as an Asset — Perhaps unsurprisingly, a recent survey indicates that older Americans, particularly those aged 60 and above, are most likely to report making a save-able income. With their major expenses like mortgages and child-rearing out of the way, they're the group most likely to have cash to spare at the end of each month.
• Schooling Pays Off — Hit the books to bank the bigs bucks. Respondents with at least a bachelor’s degree are reportedly three times more likely to have leftover money each month compared to those who didn’t finish high school.

March showcased a mixed bag in economic activities, with varying results across retail sales, construction, housing markets, and job stability. Here’s a detailed breakdown of these sectors:

Retail Sales Show Mixed Results:

• General Growth: March saw retail sales accelerate by 0.7%, notably higher than the expected 0.4%, driven by strong consumer spending.
• Sector Variability: While non-store retailers (e-commerce) and miscellaneous stores saw significant increases of 2.7% and 2.1% respectively, auto sales and several other categories declined, with auto sector sales down 0.7%.
• Yearly Comparisons: Annually, retail sales were up 4.0%, with mixed performance across categories. Sporting goods and electronics saw the most considerable declines, whereas e-commerce boasted an 11.3% increase.

Cox Automotive provides a nuanced view of the. new-vehicle market for April, indicating a mixed but optimistic outlook despite challenges. Let's look at some of the highlights:

• Sales Outlook: While April's new-vehicle sales are expected to dip by 2.2% year-over-year to 1.34M units, the seasonally adjusted annual rate suggests a resilient market. The SAAR is projected to rise to 15.9 million, slightly up from last year's 15.7M and a noticeable increase from March's 15.5M, showing underlying strength.
• Supporting Factors: Enhanced inventory levels, which are up 46% compared to last April, and rising incentives are crucial in driving sales amidst high interest rates and vehicle prices.

The dynamics of the new car market continue to evolve, reflecting significant changes in pricing, incentives, and consumer expectations. Here's a look at some of the current trends:

Pricing Trends Across Segments:

• General Price Decline: New car prices are 5.4% lower than their peak in December 2022, suggesting a shift from the recent trend of price increases. Despite a fall in prices, they still remain notably higher compared to three years ago.
• Stabilizing Prices: After a period of decline, new car prices now seem to have plateaued, even with ample dealer inventory and purchasing incentives in place.

Sales and Incentives:

• Increased Sales Volume: Transaction volumes have surged, with a 15.5% increase compared to the same month three years ago.
• Manufacturer Incentives: Incentives remain substantial, averaging about $3,100 in March, which helps maintain the momentum in sales volumes.