U.S. equities were mixed last week – the S&P 500 and the Nasdaq which are tech heavy ended the week significantly lower, driven by a sharp AI selloff among tech and semiconductor stocks as investors raised concerns over AI return on investment given higher financing costs. With this, we saw a broadening-out trade, as the equal weighted S&P significantly outperformed the cap-weighted with defensive sectors such as consumer staples and healthcare outperforming the overall indices and ending the week higher. On the economic front, September’s CPI report showed headline inflation accelerating to 3.7% year-over-year (YoY), above expectations, while core inflation came in at 2.6% YoY, also above expectations. Producer prices also surprised to the upside, jumping 1.3% for the month, the largest increase since March 2022, reinforcing concerns that higher energy costs are spreading into other parts of the economy. Retail sales increased a stronger-than-expected 0.8%, although much of the gain reflected higher gasoline prices, with sales ex-gasoline rising just 0.2%. Despite the inflation upside surprises, Treasury yields declined across the curve as a flight to safety rally took place. This week earnings season ramps up, with NFLX and META among those reporting Q3 earnings this week.
September CPI Inflation
The latest inflation report showed inflation remaining stubbornly elevated, with core CPI coming in hotter than expected. Core CPI rose 0.33% in September (versus 0.2% expectations), bringing the year-over-year (YoY) rate to 2.6% (versus 2.5% expectations and up from August’s 2.4%). Part of the reason for the higher core reading was shelter, which increased 0.4%, the largest monthly increase since April. Core services rose 0.4% compared to 0.3% in August, and supercore (core services ex-shelter) increased 0.42%, the hottest reading since January, helped by travel-related categories such as lodging (+2.0%) and airfares (+1.2%). Core goods rose 0.25% versus 0.1% last month, and the three-month pace of core goods inflation is now back near last year’s highs, as higher memory chip prices tied to AI demand and higher energy-related costs add to any remaining tariff pass-through. Looking at headline, CPI increased 0.6% for the month, or 3.7% YoY, up from 3.4% in August. Gasoline prices rose 9.1% in September, accounting for over half of the monthly increase. Energy prices remain well above year-ago levels, with the energy index up over 20% over the past twelve months and gasoline in particular up 34%. As of Friday, the probability of an October rate hike remains low. Earlier this month, New York Fed President Williams and Vice Chair Jefferson both signaled a preference to wait for more data before acting again, and the September minutes noted that most officials see another hike as appropriate “by year end,” giving the Fed room to wait until December.
September Retail Sales
Consumer spending in September came in above past expectations for a 0.30% month-over-month (MoM) increase, coming in at 0.80% and cooling slightly from last month’s 1.3% MoM increase. However, beneath the headline numbers, rising gas prices remain the majority driver behind increased consumer spending, and gas station sales further confirmed this, as they showed a 28% year-over-year increase. Stripping out gas and auto sales paints a cooler picture, with consumer spending rising just 0.25% for the month, though still above expectations of 0.20%. Spending remained strong in furniture, health & personal care, and restaurants, while sporting goods and building materials weakened, both of which contracted on the month. Overall, consumer spending remains resilient, with real spending positive over the past two months and businesses reporting firm demand. However, declining savings and flat real disposable income point to a more fragile consumer, with the saving rate falling from 5.6% in January to 4.1% in August as consumer strength continues to come at the cost of lower savings. Moving ahead, important factors that may impact consumer spending remain equity market performance, particularly for higher-income consumers who drive a large portion of overall spending, borrowing rates, and the labor market, where the unemployment rate as of September is 4.2%.
Lido Advisors, LLC is an SEC-registered investment adviser. Please note that SEC registration does not denote any particular competence or ability and no inference to the contrary should be made. For complete information on the services we provide and our fees, please review our Form ADV at adviserinfo.sec.gov, call 800-301-LIDO, or mail us at 1875 Century Park East Suite 950, Los Angeles, CA 90067.
The information contained herein reflects Lido’s views as of the date of this newsletter. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. Lido has obtained the information provided herein from various third-party sources believed to be reliable but such information is not guaranteed. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Lido is not responsible for the consequences of any decisions or actions taken as a result of information provided in this newsletter and does not warrant or guarantee the accuracy or completeness of this information.
Past performance is not indicative of future performance. The information in this report is for informational purposes only and should not be relied upon as the basis of an investment or liquidation decision. Nothing in this report shall be construed to be a solicitation to buy or offer to sell any security, product or service to any non-U.S. investor, nor shall any such security, product or service be solicited, offered or sold in any jurisdiction where such activity would be contrary to the securities laws or other local laws and regulations or would subject Lido to any registration requirement within such jurisdiction. All content herein has been obtained from sources deemed to be reliable, but is subject to unintentional errors, omissions and changes without notice, and is not warranted as to its accuracy or completeness. You should not rely on the information contained herein, and should rely solely on, and carefully read, the appropriate offering and related subscription materials relating to any specific investment product before making any investment decision.
Not all investments are suitable for all clients. It should not be assumed that any security listed or any recommendations made in the future will be profitable or without loss, including risk of loss of principal, or will equal any prior performance. All investments involve the risk of potential investment losses including the potential risk of loss of principal as well as the potential for investment gain. Further, the prior performance figures indicated herein represent portfolio performance for only a short time period and may not be indicative of the returns or volatility each portfolio will generate over a long time period. The performance of the portfolios should also be viewed in the context of the broad market and general economic conditions prevailing during the periods covered by the performance information. Any references to future returns/risk are not promises of the actual return the client portfolio may achieve. Before investing, investors should seek financial advice regarding the appropriateness of investing in any securities of investment strategies discussed. Not all investments are suitable for all investors.
The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent engagement agreement with a licensed attorney or tax professional.
Lido specifically disclaims any and all liability arising from the information or illustrations presented in these materials and is not responsible for the consequences of any decisions or actions taken as a result.
Lido Advisors, LLC is an SEC-registered investment adviser. Please note that SEC registration does not denote any particular competence or ability and no inference to the contrary should be made. For complete information on the services we provide and our fees, please review our Form ADV at adviserinfo.sec.gov, call 800-301-LIDO, or mail us at 1875 Century Park East Suite 950, Los Angeles, CA 90067.
The information contained herein reflects Lido’s views as of the date of this newsletter. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. Lido has obtained the information provided herein from various third-party sources believed to be reliable but such information is not guaranteed. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Lido is not responsible for the consequences of any decisions or actions taken as a result of information provided in this newsletter and does not warrant or guarantee the accuracy or completeness of this information.
Past performance is not indicative of future performance. The information in this report is for informational purposes only and should not be relied upon as the basis of an investment or liquidation decision. Nothing in this report shall be construed to be a solicitation to buy or offer to sell any security, product or service to any non-U.S. investor, nor shall any such security, product or service be solicited, offered or sold in any jurisdiction where such activity would be contrary to the securities laws or other local laws and regulations or would subject Lido to any registration requirement within such jurisdiction. All content herein has been obtained from sources deemed to be reliable, but is subject to unintentional errors, omissions and changes without notice, and is not warranted as to its accuracy or completeness. You should not rely on the information contained herein, and should rely solely on, and carefully read, the appropriate offering and related subscription materials relating to any specific investment product before making any investment decision.
Not all investments are suitable for all clients. It should not be assumed that any security listed or any recommendations made in the future will be profitable or without loss, including risk of loss of principal, or will equal any prior performance. All investments involve the risk of potential investment losses including the potential risk of loss of principal as well as the potential for investment gain. Further, the prior performance figures indicated herein represent portfolio performance for only a short time period and may not be indicative of the returns or volatility each portfolio will generate over a long time period. The performance of the portfolios should also be viewed in the context of the broad market and general economic conditions prevailing during the periods covered by the performance information. Any references to future returns/risk are not promises of the actual return the client portfolio may achieve. Before investing, investors should seek financial advice regarding the appropriateness of investing in any securities of investment strategies discussed. Not all investments are suitable for all investors.
The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent engagement agreement with a licensed attorney or tax professional.
Lido specifically disclaims any and all liability arising from the information or illustrations presented in these materials and is not responsible for the consequences of any decisions or actions taken as a result.
U.S. equities were mixed last week – the S&P 500 and the Nasdaq which are tech heavy ended the week significantly lower, driven by a sharp AI selloff among tech and semiconductor stocks as investors raised concerns over AI return on investment given higher financing costs. With this, we saw a broadening-out trade, as the equal weighted S&P significantly outperformed the cap-weighted with defensive sectors such as consumer staples and healthcare outperforming the overall indices and ending the week higher. On the economic front, September’s CPI report showed headline inflation accelerating to 3.7% year-over-year (YoY), above expectations, while core inflation came in at 2.6% YoY, also above expectations. Producer prices also surprised to the upside, jumping 1.3% for the month, the largest increase since March 2022, reinforcing concerns that higher energy costs are spreading into other parts of the economy. Retail sales increased a stronger-than-expected 0.8%, although much of the gain reflected higher gasoline prices, with sales ex-gasoline rising just 0.2%. Despite the inflation upside surprises, Treasury yields declined across the curve as a flight to safety rally took place. This week earnings season ramps up, with NFLX and META among those reporting Q3 earnings this week.
