Consumers Are Still Shopping, Not Dropping

This morning's data tsunami showed that the labor market remains in good shape and is fueling consumer spending. The latest data support our view that betting against consumers when jobs are expanding is a bad bet. In addition, cautious guidance by several consumer-related companies during the latest earnings reporting season might have been too cautious. Today on a call with analysts, Walmart's CEO Doug McMillon said, “So far, we aren’t experiencing a weaker consumer overall.” Bond yields and stock prices shot higher on the news that there's no recession looming.

We continue to expect the Fed will cut the federal funds rate (FFR) by 25bps in September. That may be its only cut this year, too. Market expectations for 100+ bps of rate cuts over the next six months are overdone, as they were at the start of the year (chart). We remain in the one-and-done camp for the remainder of 2024.