..Some of the best charts from the week that tell a story about the markets and economy.

Magnificent Seven Are Driving Returns
This year’s stock market performance might not be as straightforward as it seems. Much of the rally has been driven by the “Magnificent Seven” tech giants: Apple, Microsoft, Amazon, Google, NVIDIA, Meta (formerly Facebook), and Tesla.

Remove these seven stocks, and U.S. stocks have only managed a modest 5% gain for the year. What’s worth noting is that if you invest in the S&P 500 today, you’re heavily exposed to these seven companies, with an average P/E ratio of around 50.

Seasonal Weakness
Investors have historically faced disappointment in September, which has been the worst month for returns dating back to 1928. On a positive note, the last four years have witnessed a fourth-quarter rally. I wouldn’t sell or buy stocks based on seasonal trends, but being aware of the seasonality may calm your nerves.

A Second Wave of Inflation?
August saw a 3.7% increase in the overall U.S. inflation rate, marking the second consecutive rise since June. Gasoline prices played a significant role in this increase, soaring by 10.6%, accounting for over half of the CPI jump. Retail gas prices have now hit $4 per gallon and show no signs of slowing down.

Are Higher Rates Here to Stay?
A resurgence in inflation could lead to higher rates for longer. Currently, the market is predicting interest rates will remain elevated, with a projected Federal Funds Rate of 4% two years from now. For more insights on how to take advantage of these higher rates, check out my post “Where to Stash Your Cash”.

US Home Prices Just Won’t Budge
Despite the recent surge in interest rates, U.S. home prices show remarkable resilience. In July, they reached new all-time highs. One contributing factor is the persistently low inventory in the U.S. housing market. Unfortunately, this situation doesn’t make it an ideal market for first-time homebuyers.

That’s a wrap for this week! For more frequent updates, don’t forget to follow me on Twitter (@ChicagoAdvisor). Have a fantastic weekend!

George Maroudas

George Maroudas

Twitter @ChicagoAdvisor


Magnificent seven from the rest data from YCharts. Chart from George Maroudas.

US retail gasoline prices data from YCharts. Chart from George Maroudas

Market expectations for Federal Funds rate data from CME Group. Chart from George Maroudas.

Case-Shiller Home Price Index from YCharts.

September Return data from YCharts. Chart from George Maroudas

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