Annual Economic & Market Update
City of San Jacinto
November 19, 2024
Public Trust Advisors 2024 © 2
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Public Trust Advisors
717 17th Street, Suite 1850
Denver, Colorado 80202
Disclosures
Public Trust Advisors 2024 © 3
Source: Bureau of Economic Analysis, Bloomberg
Data as of: October 30, 2024
According to the government’s advance estimates, the U.S. economy grew at an annualized rate of 2.8% in the third quarter, following a 3.0% expansion in the previous quarter. Growth over the period was propelled by a 3.7% increase in consumer spending, which contributed 2.46% to overall growth. The report bolsters optimism for a potential soft-landing scenario.
Please refer to the disclosure slide of this presentation for more information.
U.S. Gross Domestic Continues to Be Supported by Resilient Consumer Spending Public Trust Advisors 2024 © 4
Source: Bureau of Economic Analysis, Bloomberg
Data as of: November 12, 2024
The adjustments announced in the August report on personal income and spending helped explain the persistent resilience in consumer activity. Revisions to income growth outpaced spending revisions, leading to an upward adjustment to the savings rate, suggesting consumers may be on stronger financial footing than previously thought.
Please refer to the disclosure slide of this presentation for more information.
Upward Revisions to Personal Savings Rate Supportive of Consumer Spending Public Trust Advisors 2024 ©
After an unexpectedly strong September employment report, boosted by the largest seasonal adjustment factor on record, the October jobs report fell significantly short of estimates. Hurricanes Helene and Milton, along with ongoing strike activity, contributed to reduced labor market activity as employment conditions continue to moderate.
Source: Bureau of Labor Statistics, Bloomberg 5
Data as of: November 12, 2024
Recent Labor Market Data Has Been Noisy Due to Seasonal Adjustments and Hurricane Effects Please refer to the disclosure slide of this presentation for more information.
Public Trust Advisors 2024 ©
The Sahm Rule was triggered in July, as the three-month moving average of the unemployment rate rose by 0.53% above its lowest level during the previous 12 months. Named after economist Claudia Sahm, this indicator has a strong history of coinciding with periods of economic recession.
Source: Bureau of Labor Statistics, Bloomberg 6
Data as of: November 12, 2024
Sahm Rule Triggered in July
Please refer to the disclosure slide of this presentation for more information.
Public Trust Advisors 2024 ©
The normalization of the ratio between job openings and unemployed individuals indicates that labor market conditions are stabilizing. This should provide the Federal Reserve with relief from rising wages and broader inflationary pressures, as workers will have fewer opportunities to switch jobs in pursuit of higher wages. 7 Source: Bureau of Labor Statistics, Bloomberg
Data as: November 12, 2024
The Ratio Job Openings per Unemployed Person has Fallen Below Pre-Pandemic Levels Please refer to the disclosure slide of this presentation for more information.
Public Trust Advisors 2024 © 8
Full-time employment continues to contract, with recent job growth concentrated in part-time positions. Historically, declines in full-time employment have been linked to periods of slowing economic growth and the onset of recessions as businesses reduce their commitment to permanent hires.
Please refer to the disclosure slide of this presentation for more information.
Full Time Employment Continues to Contract on Year-over-Year Basis Source: Bureau of Labor Statistics, Bloomberg
Data as of: November 12, 2024
Public Trust Advisors 2024 © 9
With pandemic era excess savings largely depleted and labor markets continuing to cool, consumers have increasingly turned to credit cards to support consumption, raising concerns regarding the sustainability of consumer spending, particularly as credit card delinquency rates continue to trend higher.
Please refer to the disclosure slide of this presentation for more information.
Credit Card Balances at Historic Highs as Delinquencies Rise Source: Federal Reserve, Bloomberg
Data as of: November 12, 2024
Public Trust Advisors 2024 © 10 Source: Bureau of Labor Statistics, Bloomberg Data as of: November 13, 2024
The Core Consumer Price Index (CPI) rose by 0.3% in October, matching expectations. Meanwhile, the headline CPI rose a more modest 0.2% during the same period. Through October, Year-over-year changes in headline and core CPI stand at
2.6% and 3.3%, respectively. Looking ahead, the disinflation trend is anticipated to continue, though at a slower pace.
Please refer to the disclosure slide of this presentation for more information.
Inflation Continues to Moderate But Remains Above the Federal Reserve’s 2% Target Public Trust Advisors 2024 © 11
A Reacceleration in monthly core inflation in the last three months has pushed the 3-month annualized core CPI rate back above 3.5% for the first time since April. While expectations for continued progress on inflation remain, the timing and extent of future rate cuts will depend on incoming data.
Please refer to the disclosure slide of this presentation for more information.
Recent Uptick in Inflation Illustrates Bumpy Path Towards the Federal Reserve’s 2% Target Source: Bureau of Labor Statistics, Bloomberg
Data as of: November 13, 2024
Public Trust Advisors 2024 © 12 Source: Federal Reserve, Bloomberg Data as of: November 12, 2024
After cutting rates by 0.50% at its September FOMC meeting, policy makers reduced rates by an additional 0.25% at their November meeting to range of between 4.50% - 4.75%. During the post meeting press conference, Fed Chair Powell noted that policy is still restrictive, and the Fed is in the process of brining rates to neutral levels.
Please refer to the disclosure slide of this presentation for more information.
The Federal Has Reduced the Federal Funds Rate to a Range of Between 4.50% and 4.75% Public Trust Advisors 2024 © 13 Source: Federal Reserve, Bloomberg Data as of: November 12, 2024 Please refer to the disclosure slide of this presentation for more information.
Market Participants Currently Anticipate Between Two and Three Additional 25 Basis Point Rate Cuts Pricing in the federal funds futures market currently reflect market expectations of between two and three additional 25 basis point rate cuts by the Federal Reserve. Expectations for the pace and magnitude of rate cuts have been scaled back recently as economic data has remained resilient.
Public Trust Advisors 2024 © 14 Source: Federal Reserve, Bloomberg Data as of: November 12, 2024 Please refer to the disclosure slide of this presentation for more information.
Market Participants Currently Anticipate Between Two and Three Additional 25 Basis Point Rate Cuts Expectations for the number of rate cuts in 2024 have been volatile as market participants adjust expectations to evolving economic data. As a result, 2-year Treasury yields have traded in a wide range, closing the third quarter at their lowest levels in 2-years but rising in the aftermath of the Federal Reserve’s 50 basis point rate cut on September 18th Post 9/18 rate
cut period
Public Trust Advisors 2024 © 15 Source: Bloomberg
Data as of: November 12, 2024 Please refer to the disclosure slide of this presentation for more information.
Yields Fell Notably Over the Past Year as Expectations for Fed Rate Cuts Took Hold Yield have declined materially relative to year-ago levels as market participants prepared for the Fed’s much anticipated first rate cut which was delivered on September 18th. Following a record long period of inversion, the yield curve has steepened notably in recent months and dis-inverted in September for the first time since July 2022.
Public Trust Advisors 2024 © 16 Source: ICE BofA Fixed Income Indices, Bloomberg Data as of: November 13, 2024
Please refer to the disclosure slide of this presentation for more information.
Credit Spreads Remain at Muli-Year Tights as Optimism Over Soft Landing Builds Index Description Current
OAS
3-Month
Change
12-Month
Avg. OAS
Current vs.
12-Month Avg.
3-Year
Avg. OAS
Current vs.
3-Year Avg.
5-Year
Avg. OAS
Current vs.
5-Year Avg.
ICE BofA 1-5 Year US Bullet Agency Index (OAS) -0.02% -0.04% 0.01% -0.03% 0.04% -0.06% 0.05% -0.07% ICE BofA 1-5 Year AAA-A US Corporate Index (OAS) 0.48% -0.09% 0.60% -0.12% 0.69% -0.21% 0.65% -0.17% ICE BofA 0-5 Year AAA US Fixed Rate Asset Backed Securities Index 0.57% -0.02% 0.64% -0.07% 0.73% -0.16% 0.67% -0.10% ICE BofA 1-5 Year BBB US Corporate Index 0.81% -0.08% 0.95% -0.14% 1.15% -0.34% 1.16% -0.35% Option Adjusted Spread to Government Securities