Financial News for the Week of September 9th, 2022

Financial News Highlights

  • The ISM Services index expanded at the fastest pace in four months with demand components rising and supply side challenges normalizing.
  • The Fed’s Beige book pointed to a further softening in demand, while also suggesting that labor markets remained tight.
  • A hot labor market is contributing to the Fed’s hard line on inflation emphasized in speeches this week. This solidified market expectations for a three-quarter hike in September.

U.S. - Fedspeak Solidifies Bets for Supersized Hike

Financial News Chart one shows the monthly series for the purchasing managers' business activity index in the services sector, as reported by the Institute for Supply Management (ISM) and the Information Handling Services (IHS) Markit, from January 2019 to August 2022. A reading above 50 indicates expansion while a reading below 50 indicates contraction. Throughout the history shown, the two series tend to move in the same direction. As of July of this year they started to diverge, with the ISM series expanding and the IHS Markit index moving into the contractionary territory.The first post-Labor-Day week was scant on economic data, but markets had plenty of remarks from FOMC members to digest in financial news. Fed speakers’ hawkish message led Treasury yields higher, with the 2-Year yield up 12 basis points (bps) and the 10-Year yield up 10 bps on the week, at time of writing. The economic data was largely second tier sentiment surveys, which sent some conflicting signals.

The ISM Services index rose in August, expanding at the fastest pace in four months. The underlying measures remained on the right track. The demand components - such as business activity and new orders – reached above 60 for the first time since December and March, respectively. Meanwhile, supply-side challenges continue to normalize with employment subindex moving into the expansionary territory, supplier deliveries times returning to their pre-pandemic average, and prices paid component easing.

Yet, the reading came as a surprise as consensus was pricing a moderation, and the other services flash indicator – the IHS Markit PMI  – contracted in August. Demand components were especially contrasting, as the ISM index suggested strengthening while the IHS Markit pointed to a looming demand destruction (Chart 1). The differences in methodology explain the divergence in the signals: the ISM index includes a broader range of industries (including construction and mining) and reflects business conditions of its members who tend to be larger and more established companies. The IHS measure therefore better reflects the sentiment of small- and medium-sized enterprises, but we find that the ISM index has stronger historical correlations with services spending.

Financial News Chart two is a bar chart that shows the target rate probability for the Fed's meeting on September 21st, 2022, expressed as a percent. Probabilities of possible Fed Funds target rates are based on Fed Fund futures contract prices. The two clusters of bars – one for probabilities of 275-300 basis point target rate range and the other for probabilities of 300-325 basis point target rate range – depict the evolution in the futures market on three dates: August 8th, September 1st, and September 8th. The probability for a more aggressive target range of 300-325 basis points moved from 68% in August, to 75% in early September and finally to 86% on September 8th.While this divergence clouds the outlook, we expect the truth to lie somewhere in the middle, with current economic activity remaining unchanged. This sentiment was echoed in the Fed’s Beige book that gathers anecdotal information on current economic conditions through July and August across Federal Reserve Bank districts. The report characterizes consumer spending as “steady” and points to expectations for further softening of demand over the next six to twelve months in further financial news. On the other hand, respondents indicated that labor market conditions remained tight, but also pointed to a slower pace of wage increases and moderating salary expectations.

The tightness of labor market is a big part of why the Fed takes a hardline inflation fighting stance. FOMC speakers took every opportunity to reinforce their unanimity on this front ahead of the central bank’s black-out period prior to its September 21st rate decision. Chair Powell was very explicit by stating that the Committee wants to soften growth enough to “cause the labor market to get back into better balance, and then that will bring wages back down to levels that are more consistent with 2% inflation over time.” Investors heard it loud and clear with the federal funds futures markets now have greater conviction that the Fed will hike 75 basis to 3.25% (Chart 2).  Moreover, the market appears less convinced that there will be rate cuts next year, buying into the Vice Chair Brainard’s “we are in this for as long as it takes to get inflation down” mantra.

 

Maria Solovieva, CFA, Economist | 416-380-1195

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Financial News for the Week of September 2nd, 2022

Financial News Highlights

  • A strong week for economic data as the ISM manufacturing index and the payrolls report surprised to the upside.
  • The details of both reports showed improvements on the supply-side of the economy as falling manufacturer input prices and a strong improvement in the labor force shined through.
  • The Fed still has its hands full taming inflation, but supply-side improvements could make the job much easier.

U.S. -

Good News on Aggregate Supply

Financial News Chart 1 shows the prices and supplier delivery subindexes from the ISM manufacturing survey. The chart highlights that both series have been trending downward over the past few months. The supplier deliveries subindex was at 55.1 in August and the prices subindex registered 52.5. Both measures have been key indicators of supply side problems in the global economy and have shown significant improvement in the past few months.Markets continued to sell off this week as better than expected data dimmed the hopes of a 50-basis point hike by the Fed at its upcoming September meeting in financial news. However, there were some reassuring signals in the ISM manufacturing report and the household employment survey that the supply-side of the economy continues to improve and may help moderate inflation. The Fed will continue its hiking cycle, but the supply-side improvements might just make the job of taming inflation a bit easier.

Tuesday’s solid job openings data from the JOLTS survey grabbed headlines. Private openings in July were north of 10 million. Though sky high job openings have become the norm, they are remarkable relative to history and represent the scale of the problem the Fed is looking to solve. To tame inflation, officials are hoping to lower the rate of job openings, without meaningfully raising the unemployment rate. There is little historical precedent for this, but there is also little modern historical precedent for what has transpired in the economy over the past two years. Nonetheless, with job openings still high, the labor market is signaling that employment demand remained robust in July despite rising interest rates.

The good economic news continued yesterday as the ISM manufacturing index surprised to the upside in August, registering a healthy 52.8 print. Growth and production were notably slower than earlier in the recovery, but this was to be expected as the economy continues to operate in excess demand territory. The details in the report were also strong. New orders flipped back to growth and employment was up for the month. For the Fed, there was good news on supply chains as the supplier delivery index was unchanged and input price growth eased to its lowest rate since the summer of 2020 [Chart 1].

Financial News Chart 2 shows the change in the labor force on the left-hand axis and the year-on-year percentage change in average hourly earnings on the right-hand axis. The labor force added 786 thousand individuals in August, its strongest print since January. Meanwhile, average hourly earnings registered +5.2% y/y growth in August, unchanged from July. All of this was a buildup to today’s employment report. Consensus expectations were for nearly 300k new jobs, a print that would register as “good” during any expansion, let alone one that has featured so little bounce-back in the participation rate. Well, the data came in slightly better than expected, with payrolls adding 312k jobs, but it was the household report that had some positive elements. August showed that there was finally a large movement of people back into the labor force, 786k to be exact [Chart 2]. This helped lift the participation rate 0.3 percentage points, to 62.4% and brought some much-needed supply to the labor market. As the labor force expanded faster than employment, the unemployment rate rose to 3.7%. With just a bit more labor supply, average weekly wages moderated to 0.3% month-on-month, from 0.5% the month prior.

The Fed will see this report as good news. The drum-tight labor market is a key factor in setting wage expectations, and with more workers coming in off the sidelines, it means just a bit less wage pressure in further financial news. That said, labor markets remain tight as wage growth is still at 5.2% year-on-year, and inflation is still persistently high. The Fed will continue to raise rates to fight inflation, but this week’s data suggest that some of the supply-side factors behind current price growth are finally starting to abate.

 

Andrew Hencic, Senior Economist | 416-944-5307

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Financial News for the Week of August 26th, 2022

Financial News Highlights

  • Fed Chair Jay Powell’s hawkish remarks at the annual Jackson Hole conference did not sit well with equity markets.
  • The second estimate of Q2 GDP data showed that the economy contracted slightly less, and that GDI grew modestly.  looking at an average of the two measures shows that the U.S. economy grew only slightly in the first half of the year.
  • President Biden announced details on a much-anticipated student debt forgiveness plan that will forgive up to $20,000 in federal student debt per borrower.
  • A reduction in student debt will be stimulative for people receiving the relief, and could add more fire to current inflationary pressures, making the Fed’s job that much more difficult.

U.S. - Powell Stands Firm on Higher Rates

Financial News Chart 1: GDP-GDI, Potayto – Potahto, shows the quarterly growth in output measured by GDP and GDI, and then the average of the two. In the first two quarters of 2022, GDP has contracted, while GDI has remained slightly positive. The average of both measures grew between 4-7% in 2021, but has now slowed to only just above zero in the first half of 2022.It was a full week for economic data, but the most anticipated event for markets was the Fed Chair’s speech at the annual Jackson Hole conference on Friday in financial news. Equity markets didn’t like what they heard. Powell’s hawkish remarks that the Fed remains committed to fight inflation and is likely to keep rates high for an extended period did not sit well with investors, and stocks fell on the remarks. The yield on the 2-Year Treasury was up slightly after the speech, continuing a recent trend as markets expect a bit more monetary tightening over the next two years.

Longer-term bond yields remain lower than the 2-Year as markets expect an economic slowing and future rate cuts by the Fed. It is understandable that investors are worried about a recession, when the second estimate for GDP growth in Q2, was revised up only slightly and still contracted by 0.6% annualized. This release was more highly anticipated than usual because it included another measure of national output – Gross Domestic Income (GDI). GDI measures output based on income in the economy – summing wages, profits, interest payments and investments. Whereas GDP is defined as the value of final goods and services on the production side. In theory they should be similar, but there usually is some deviation due to being measured from different data sources.

Some economists argue that GDI is the better measure – but it is released later by the BEA, and so usually gets less attention. Early estimates of GDI better captured the downturn in the 2007-09 recession. The compromise is that an average between the two measures likely captures momentum in the economy best. In the first half of 2022, GDP estimates suggested the economy contracted, while GDI showed the economy grew at 1.6% on average through Q1-Q2 (Chart 1). The average of the two measures shows the economy stalled in the first half of the year, so to some extent it feels like a potayto-potahto situation – either way you slice it, the U.S. economy is on a dramatically slower growth trajectory in 2022 in the face of high inflation, rising interest rates and less fiscal stimulus.

Financial News Chart 2: Fed's Preferred Inflation Measure Shows Signs of Cresting' Chart 2 shows that the core PCE deflator, which is the Fed's preferred measure of inflation is showing early signs of cresting. On a year-on-year basis, inflation ahs slowed from 5.3% in February to 4.6% in July. Looking a the annualized pace over the last three months, inflation is at 4.3%, much lower than earlier in the year.As for momentum in the second half of the year, consumer spending data for July showed that nominal spending continued to lose momentum. But, due to weaker inflation pressures, the real spending slowdown is somewhat less than we expected a few weeks ago. Real consumer spending is tracking around 1.5-2% annualized in the third quarter, which is roughly the same pace averaged over the first half of the year in financial news. This suggests the consumer is proving quite resilient to all the onslaughts against their purchasing power.

Inflation, as measured by the core PCE deflator, also cooled a bit in July. Looking at it on a year-on-year basis, core inflation has cooled to 4.6%, and ran at a 4.3% annualized pace over the past three months (Chart 2). We aren’t saying that inflation pressures have been vanquished, but it is encouraging they are moving in the right direction. Given the false dawn we had last year, where inflation pressures originally cooled, only to quickly heat up again, Chair Powell is right to point out that the Fed needs to see more convincing evidence before easing up on rate hikes.

Leslie Preston,  Senior Economist | 416-983-7053

U.S. Students Get Up to $20,000 in Student Debt Erased

Financial News Chart 1 is a 100% stack bar showing the percentage share of cumulative amount borrowed for undergraduate studies by race: Asian, White, Black, and Hispanic. Each category shows a percentage of debt holding by average amount borrowed: up to $10,000, $10,000 to $24,999, $25,000 to $39,999, $40,000 to $59,999 and those who hold more than $60,000+. Almost 65% of all African- American college graduates hold an average loan of more than $25,000 (relative to 40% for White, 21% for Asian and 36% for Hispanic students).President Biden announced a much-anticipated executive action to reduce the burden of federal student debt in financial news. At the time of writing, the White House hasn't provided cost estimates, or all the details, but according to the Committee for a Responsible Federal Budget, the plan will cost roughly $500 billion dollars over the next 10 years.

Under the plan, $10,000 in federal student loan debt will be forgiven for borrowers making under $125,000 (or $250,000 for couples). Approximately 40 million borrowers would be eligible for this amount. In addition, up to $20,000 will be forgiven for the 27 million recipients of Pell Grants – a specific program for students in financial need. It's estimated that more than a third of the total $1.6 trillion in student debt will be forgiven.

The plan also modifies existing income-driven repayments by reducing future monthly payments for lower-and middle-income borrowers. Payments will be reduced from 10% to 5% percent of discretionary income, and forgives loan balances of $12,000 or less after 10 years.

Furthermore, borrowers who are employed by non-profits, the military, or government may be eligible to have all their student loans forgiven through the Public Service Loan Forgiveness program. The pandemic moratorium on federal student loan payments will also be extended through December 31st, saving roughly $20 billion in debt payments.

The announcement puts an end to a debate that has been around since at least the Occupy Wall Street protests a decade ago. The proponents of forgiveness argue it would stop the racial wealth gap from growing and help borrowers turn regular earnings into longer-lasting wealth. Indeed, African American college graduates hold disproportionally large student debt balances in comparison to peers (Chart 1). Those against forgiveness point out that student debt is disproportionately held by more affluent families, and that it will stimulate economic activity at the time when inflation is already running hot.

Financial News Chart 2 shows student debt forgiveness benefit distribution by income quintile for those eligible to receive $10,000 in the under the broader part of the program. Top 60% of all households (with income of more than $82K a year) will receive 69% of the total benefits allocated under the broader part of the program.

 

The debate is hot but ultimately the additional forgiveness of $20,000 for Pell grant recipients and modifications to income-driven repayment programs makes the plan more targeted towards lower-income Americans, helping the administration achieve progressive goals. According to White House's estimates, 87% of the relief will go to lower-income families earning less than $75,000. However, some portion of higher income families stand to benefit, given that the income threshold set at $125,000 is well above the median American income (Chart 2).

In terms of the economic impact, a reduction in student debt will be mildly stimulative, though the average borrower can expect to have their annual payment reduced by $1,000. While there’s still uncertainty over both the timing and implementation of the program, preliminary estimates suggest that the impact to economic growth will be relatively small compared to its cost – with only a tenth of the dollar amount forgiven expected to flow back into the economy.  Still, more economic stimulus at time when inflation is already running at multidecade highs will make the Fed’s job that much harder to regain price stability over the coming years.

Maria Solovieva, CFA, Economist  | 416-380-1195

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Financial News for the Week of August 19th, 2022

Financial News Highlights

  • Total retail sales were flat in July, marking a deceleration from June’s pace. However, sales in the control group, which exclude several volatile categories and are used in calculating GDP, rose a sturdy 0.8% m/m.
  • Housing continued to cool in July. Existing home sales fell 5.9% and the median seasonally adjusted home price retreated for the second month in a row. Homebuilders also continued to ease off the accelerator, with starts down 9.6% in July.
  • Minutes from last month’s FOMC meeting revealed that many participants acknowledged the risks that that the Committee could tighten the stance of policy by “more than necessary”.

How Quickly to Raise Rates? That Is the Question

Financial News Chart 1 the month-to-month change for three retail sales series: Total retail sales excluding autos and gas, sales in the control group (which exclude a few volatile categories from the total), and sales in control group after stripping out e-commerce sales (more precisely sales at non-store retailers). The first two series rose respectively by 0.7% and 0.8% in July – roughly in line with their recent trend. However, once the non-store sales are stripped out of the control group, the series' gain is muted to 0%.The third week of August was a busy data week for the U.S., with updates on housing and the consumer for July in financial news. The consumer spent a little more than expected at retailers (omitting auto dealers and gas stations), thanks to a successful Amazon Prime Day event, but housing is continuing to recalibrate to the higher rate environment.

Headline retail sales were flat in July, marking a deceleration from June’s 0.8% month-over-month (m/m) gain. However, the headline measure was dragged down by sales auto & part dealers (-1.6%) and gasoline stations (-1.8%), the latter reflecting lower prices at the pump. Retail sales in all other categories rose a sturdy 0.7% m/m. Similarly, sales in the control group, which strip a couple of more categories from the total and are used in calculating personal consumption expenditures and GDP, were up 0.8% m/m thanks to a boost from sales at non-store retailers (Chart 1). Total CPI inflation was flat in July, so by these measures, real goods consumer spending appears to have had a decent start to the third quarter.

Financial News Chart 2 shows the seasonally adjusted median U.S. home price from January 2019 to July 2022. The chart shows that after a strong run during the pandemic period, the median home price has pulled back a bit recently, falling modestly in each of the last two months. Consumers also spent handsomely at building material and supply dealers last month (+1.5% m/m), a move that went against the grain of the ongoing weakening in housing. Existing home sales fell by almost 6% in July, extending their downward slide from the start of the year to a staggering 26%. Home prices have also been feeling the impact of higher rates, with the median seasonally adjusted home price falling in each of the last two months (Chart 2). The fact that mortgage rates have eased a bit over the past several weeks could provide an opportunity for the housing rout to take a breather. However, the Fed is not done hiking rates, so affordability is likely to remain a meaningful constraint for the foreseeable future. As a result, we expect home sales to continue trending moderately lower through the first half of next year.

Homebuilders have continued to ease off the accelerator amidst this challenging market backdrop, with starts falling 9.6% in July. The weakness in homebuilding over the last several months has been concentrated in the single-family market. A recent sharp decline in homebuilder confidence in this sector suggests that the trend is poised to continue.

The fallout from the downturn in the housing market is only one factor the Fed must consider as it gears up to raise rates again next month in further financial news. Minutes from last month’s FOMC meeting revealed that many members acknowledged the risks that the Committee could tighten the stance of policy by “more than necessary”. In addition, participants judged that as the policy rate is tightened further “it would become appropriate at some point to slow the pace of policy rate increases” to assess the impacts. Markets interpreted this as a signal that the pace of rate hikes would slow soon, but a few Fed officials (i.e., Bullard, voting member, backs a 75-basis point (bp) hike next) appeared to push back against that notion. For now, markets are pricing in a 50-bp hike at the next meeting. Chair Powell’s Jackson Hole speech next Friday will be closely watched to gauge the Fed’s latest thinking as to where rate hikes are headed.

 

Admir Kolaj, Economist | 416-944-6318

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Financial News for the Week of August 12th, 2022

Financial News Highlights

    • The U.S. Senate passed a climate, healthcare, and tax bill known as the Inflation Reduction Act of 2022 earlier this week. The legislation is now off to the House of Representatives for a final vote later today where it is expected to pass.
    • July CPI came in weaker than expected, with the headline measure flat on the month and core “only” increasing by 0.3% month-over-month.
    • While the deceleration in inflation comes as welcome news to policymakers, Fed officials have reiterated that more tightening will be required to achieve price growth stability of 2%.

      U.S.-Inflation Was the Word of the Week

Financial Advisor Cornelius NC-Financial News: Chart 1 shows headline inflation along with several sub-components: energy, food, goods, and services. The chart dates back to January 2020 and extends through to July 2022. The data is shown in monthly frequency and shows the month-over-month percent change. Headline inflation was flat in in July, as energy (-0.4%-pts) subtracted from the total, while services (0.2%-pts), food (0.1 %-pts) and goods (0.1%-pts) all added. Data is sourced from the Bureau of Labor Statistics.

It was a week full of surprises, with inflation being the key theme in financial news. Chief among them was the U.S. Senate quickly moving to pass the Inflation Reduction Act of 2022 (IRA). It now heads to the House of Representatives later today for a final vote, where it’s expected to pass. The reconciliation bill is a significantly scaled back version of the far more ambitious Build Back Better Act, though it still incorporates many of the key climate related initiatives that were included in the previous bill.

In terms of broad strokes, the IRA aims to spend roughly $430B on climate and healthcare initiatives over the next decade and is estimated to more than offset those expenditures with $740B of proposed revenue. Over 85% of the appropriated expenditures will be directed towards climate related initiatives and will be dispersed mainly through grants and loans. Of those investments, perhaps most noteworthy is the $80B in new rebates allocated to eligible households for electric vehicles (EVs) and to help decarbonize residential buildings. The additional funding for EVs not only maintains the existing $7,500 rebate but also introduces a new tax credit of up $4,000 for both used and new EVs, with the latter applying only to those vehicles made in North America.

On the healthcare side, the IRA will put a cap of $2,000 on out-of-pocket prescription drug costs for individuals on Medicare. It also aims to bring down the cost of the most expensive drugs by allowing the government to negotiate the price of a subset of those drugs covered by Medicare, though this won’t start until 2026.

Financial Advisor Cornelius NC-Financial News: Chart 2 shows the month-over-month change of airline fares, car & truck rental prices and lodging away from home. The chart dates back to January 2022 and extends through July 2022. After having increased significantly earlier this year, airline prices, car & truck rental prices, and lodging away from home, have all decelerated through the late-spring and summer months and registered declines of –7.8%, 9.5%, and -2.7%, respectively, in July. Data is sourced from the Bureau of Labor Statistics.All of this will be paid for through a new 15% minimum corporate tax imposed on corporations earning more than $1B, enhancements to the IRS audit and review process, and taxing share buybacks. The fact that the deficit will be reduced over the next decade is what is being used to justify the “inflation reduction” element of the bill. However, the total deficit reduction is only estimated to be $400B (or 1.6% of GDP), and will be spread over the next decade – suggesting the impact to growth and inflation will likely be negligible.

Turing to the other surprise this week, July CPI data (finally!) came in weaker than expected. The headline index was flat on the month, while core prices “only” rose by 0.3% m/m (Chart 1). Indeed, the recent pullback in energy prices subtracted from the headline measure, though accelerating food prices provided a partial offset in further financial news. Looking to the core measure, there were a few encouraging tidbits. Core services grew by 0.4% m/m – down from the 0.7% m/m reported in June. A lot of the pullback was the result of a softening in travel-related categories, such as airfares, car rentals, and lodging away from home (Chart 2). Other green shoots emerged on the goods side, as prices across most categories decelerated, while used vehicle prices, apparel, and education goods all declined.

This will be welcome news to FOMC officials, but as San Francisco Fed president Mary Daly said on Wednesday “it’s still too early to declare victory”.  Daly reiterated her support to dial back on the pace of rate hikes in September but didn’t rule out another 75bps move should the turn in inflation prove to be fleeting.

 

Thomas Feltmate, Director | 416-944-5730

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Financial News for the Week of August 5th, 2022

Financial News Highlights

    • The U.S. economy added a whopping 528k jobs in July, pushing employment above its pre-pandemic level. The unemployment rate also ticked lower, falling back to its pre-pandemic historical low of 3.5%.
    • Sentiment indicators also surprised to the upside, with the manufacturing sector faring better than expected and the services sector pointing to plenty of pent-up demand.
    • Data out this week support the narrative that the U.S. economy is not currently in a recession, and more monetary tightening will be required from the FOMC to slow inflation and restore balance in the labor market.

      U.S. More Fuel to the Recession Debate

Financial Advisor Cornelius NC Chart 1 shows total non-farm employment from December 2019 to July 2022 in comparison to February 2020 level (which amounted to 152,504 thousand jobs). In July 2022, non-farm emloyment reached the level of 152,538 thousands, surpassing its pre-pandemic level.This week in financial news, the debate on whether the Fed will be able to achieve a soft landing intensified. Equities were trading up most of the week as investors bought into the positive economic news with an expectation that a slowdown in economic growth will avoid a severe downturn. In contrast, the bond market took a grimmer view of the future, by pushing the 10Y2Y yield inversion deeper into negative territory, suggesting a recession may be looming on the horizon.

Investors weren’t the only ones arguing about the economic prospects. In academic circles, the debate on whether a soft landing can be achieved was out in the open. At its core is the argument that job vacancies can’t decline by a large amount without the economy falling into recession. This week’s release of June’s Job Openings and Labor Turnover Survey (JOLTS) showed that job openings dipped to 10.7 million while job vacancy rate continued to decline, indicating we have likely already surpassed peak tightness in the labor market. Still, demand for workers continued to outpace supply - a sign of a still strong labor market.

Indeed, anyone in search of more signs that the economy is in fact not in a recession need to look no further than today’s jobs report. July data shows that the economy added a whopping 528k jobs (well above the consensus forecast of 250k), while revisions resulted in additional 28k jobs – enough for the payroll figures to surpass their pre-pandemic level (Chart 1). The unemployment rate declined by a tenth of a percentage point to 3.5%, while the labor force participation rate fell slightly to 62.1%. Furthermore, average hourly earnings accelerated – not quite what the Fed was looking for as this increases the possibility of inflation becoming entrenched.

Financial Advisor Cornelius NC Chart 2 shows monthly series of the Institute for Supply Management's (ISM) sub-index for prices paid in manufacturing and services sectors from January 2018 to July 2022. Both indexes show a sizeable drop in the prices paid component with the manufacturing index dropping by 18.5 percentage points to 60 percent, while the services index declining by 7.8 percentage points to 72.3 percent in July. Meanwhile, sentiment indicators also surprised to the upside in financial news. The Institute for Supply Managements’ (ISM) readings for the manufacturing sector slipped modestly but came in above expectation. Demand is clearly slowing with new orders contracting for the second month in a row. Still, this comes with less pressure on suppliers, as supplier delivery times rose at their slowest pace since before the pandemic. Moreover, the inventories subindex continues to show improvement. This corresponds with rising auto inventories, where increased production helped improve market supply to roughly 28 days from February’s low of just 24 days.

The ISM services index pointed to a broad pickup in services activity, proving again that there is still plenty of pent-up demand. The gap between the supplier deliveries time and the rest of the index’s drivers narrowed in July – a month after a similar improvement in the manufacturing sector. This seems to have contributed to a decline in the prices paid component in both sectors of the economy (Chart 2). The sizeable deceleration in the ISM price subindexes may very well be a harbinger of a slowing pace in broader price growth, which we’ll hopefully see in next week’s CPI report.

Still, at the 40-year high price growth is too overwhelming for the Fed to scale back on rate hikes. For now, robust employment growth adds further conviction that the economy remains on a solid footing and suggests the FOMC needs to remain aggressive in tightening rates to help cool inflation and re-anchor inflation expectations.

Maria Solovieva, CFA, Economist  | 416-380-1195

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Financial News for the Week of July 29th, 2022

Financial News Highlights

  • Highlights

    • Real GDP declined for the second consecutive quarter in Q2, meeting one (narrow) criteria of a recession.
    • The Federal Reserve delivered another supersized rate hike of 75bps this week, bringing the upper bound of the policy rate to 2.5%. Chair Powell emphasized the need to take rates higher but neglected to give any forward guidance.
    • The energy shock due to Russia’s war in Ukraine that is fueling much of the region’s inflation is also increasingly likely to profoundly restrict growth.
    • For the European Central Bank, this represents the worst-case scenario, as it could soon be faced with the prospect of raising rates to preserve longer-term stability despite an output contraction.

      U.S. Technically Not There (Yet)

      Financial News Financial Advisor Cornelius NC: Chart 1 shows US contributions to real economic growth dating back to 2021:Q1 through to 2022:Q2. GDP declined by 0.9% q/q (annualized) in the second quarter, with residential and inventory investment subtracting over 3 percentage points from headline growth. Personal consumption expeditors (0.7pp) and net exports (1.4pp) both added to growth. Data is sourced from the Bureau of Economic Analysis. The dreaded “R” word (recession) isn’t one economist’s use lightly. This is why so much focus was placed on this week’s advance estimate of Q2 GDP and the FOMC meeting in financial news.

      According to Bureau of Economic Analysis, real GDP declined 0.9% q/q (annualized) in Q2 – well below the consensus forecast of a modest 0.4% gain (Chart 1). More significant than the headline print was that activity has now declined in each of the last two consecutive quarters – meeting one (narrow) criteria of a “technical” recession. At this point, most economists would agree that the US economy isn’t (yet) in recession. The National Bureau of Economic Research (NBER), who is tasked with dating business cycles, would also agree. Outside of just economic growth, the NBER considers a host of other indicators including measures of production, employment, and income. At present, most of these measures continue to point to an economy that remains in expansionary territory.

      That said, domestic demand has shown a clear sign of slowing. Consumer spending decelerated to just 1% in the second quarter, while fixed investment declined by 3.9%. At this point, it doesn’t appear that growth prospects will be improving anytime soon. Measures of both consumer and business sentiment have turned decisively lower in recent months, and this is showing in the monthly consumer spending data (Chart 2). After adjusting for inflation, real consumer spending was up just 0.1% m/m in June – a rebound from May’s 0.3% decline – but nonetheless a weak handoff into Q3.

      Financial News Financial Advisor Cornelius NC: Chart 2 shows business (left axis) and consumer confidence (right axis) in monthly terms dating back to 2018. Both measures of confidence have steadily declined through the latter half of 2021 and through the first six months of 2022. Data is sourced from the National Federation of Intendent Business and Conference Board.The FOMC acknowledged the recent softening in economic data in the very first sentence of its July statement. But that didn’t stop them from raising rates by another 75bps. At 2.5%, the policy rate is now in the vicinity of the FOMC’s assessment of neutral – the interest rate that’s neither accommodative nor restrictive. However, Chair Powell was explicit in the press conference that the Committee intends to raise the policy rate well into “restrictive” territory in order to return price stability. Powell was careful in his word choice, admitting that doing so will lead to some slowing in growth and a rise in the unemployment rate, but skirted any explicit reference to recession.  Just how far above neutral the FOMC will have to go remains dependent on how the economy responds to past hikes between now and September.

      Perhaps the most noteworthy takeaway from Powell’s entire press conference came from what he neglected to say. In contrast to more recent briefings, the Chair failed to give explicit forward guidance on the expected changes to the policy rate at its next meeting in major financial news. Instead, he emphasized the need to “just go to a meeting-by-meeting basis”, suggesting the size of future hikes will be entirely data dependent. From that perspective, the July/August CPI and employment reports will be under the microscope.  However, the Q2 release of the employment cost index will also catch the FOMC’s eye. The index adjusts for the composition of jobs, providing the cleanest snapshot of overall employee earnings. It showed that growth in employment compensation remained elevated in Q2 – growing 5.4% (annualized). From a scoring perspective, this favors another big move in September. Let’s see what employment brings next Friday!

      Thomas Feltmate, Director | 416-944-5730

      The European Dilemma

      Financial News Financial Advisor Cornelius NC: Chart 1 show the contributions to growth of four components of inflation in the euro area. The chart shows that energy contributed 4.2% to headline inflation in June, followed by food at 1.9%, services at 1.4%, and non-energy industrial goods at 1.2%. This chart shows that inflation in the euro area is still overwhelmingly driven by high energy prices.The European Central Bank (ECB) is facing a daunting outlook. The energy  shock due to Russia's war in Ukraine that is fueling much of the region's inflation is also increasingly likely to profoundly restrict growth in financial news. As near-term indicators are signaling that a recession may soon begin, the ECB has committed to a "meeting-to-meeting" basis for rate decisions that could force them to raise rates into a recession.

      Near-term tracking measures have started to show a steep deceleration, or outright contractions, in economic activity in the euro area. July's flash PMI readings for the euro area reflected a decline in output, with much of the pain being felt in its industrial engine – Germany. The EuroCOIN and Ita-COIN indicators are also showing growth having topped out and starting to fall.

      Looking forward, it is the ongoing lift to energy prices that is most concerning. Recession fears have helped crude oil prices off their highs, but supply concerns have supported a high floor under prices. Moreover, if Russia halts natural gas flows to Europe, it risks creating an outright shortage in the coming months, further raising inflation  and reducing output. Thus far the energy shock is responsible for roughly half (Chart 1) of the inflationary impulse in the euro zone.

      A full stoppage of gas flows would lead to substantial demand destruction and a host of literature on potential losses has emerged in the past months. IMF researchi suggests E.U. output losses could range between -2.7%, in the worst-case scenario and -0.4% if the E.U. were able to fully  integrate into the global LNG market.

      Financial News Financial Advisor Cornelius NC: Chart 2 shows the percent balance of consumer confidence in the euro area. The index shows that in July 2022 the share of respondents reporting a decrease in confidence was 27.0 percentage points greater than those reporting an increase. This is the lowest reading on record.To counteract the risks, the European Commission has asked for a voluntary 15% reduction in natural gas usage across the EU (with some exceptions). These voluntary cutbacks could go a long way to limit the economic fallout from a gas shortage. IMF estimatesii for Germany suggest that by strategically rationing gas, the direct GDP loss in the first six months of the shock could be reduced from 0.9% to 0.2%.

      Beyond the direct effects, consumer confidence is tumbling (Chart 2). Falls this large typically drive up precautionary savings. Meanwhile, business confidence, having remained relatively resilient through June is starting to weaken notably.

      The ECB supported its decision to raise interest rates by 50 basis points by emphasizing the need to temper inflation expectations and the introduction of a new bond-buying tool to help monetary policy transmission. However, higher energy prices are fueling an inflationary feedback loop, and it may soon be faced with the prospect of raising rates to preserve longer-term stability despite an output contraction.

      Andrew Hencic, Senior Economist | 416-944-5307

 

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Financial News for the Week of July 22nd, 2022

Financial News Highlights

  • June’s housing data showed another decline in activity as the effects of higher mortgage rates and stretched affordability impact the market.
  • A strong labor market and tight inventories will support housing construction and limit the downside risks.
  • Despite the slowdown in the housing market the Fed will keep up its fight against inflation with another 75-basis point hike next week.

U.S.-Softening Housing Market Won’t Deter Fed

Financial Advisor Cornelius NC Financial News: Chart 1 shows the number of units authorized but not started for both the single family and multi-unit residential segments in the U.S. The chart shows that the multi-unit segment has caught up in volume with the single-family segment and both are at elevated levels relative to their history. The multi-unit segment has 138 thousand units approved but not started, while the single-family segment has 147 thousand units approved but not started.This week’s housing data showed that the market continued to slow meaningfully through June in financial news. Yet, as inflation continues to linger at multi-decade highs the Fed will keep up the fight against rising prices by raising rates another 75-basis points (bps) next week. Fortunately for the housing market a strong labor market and tight inventories will support construction and limit the possibility of a rapid deterioration of conditions.

On Tuesday the Census Bureau released June data on national housing starts. Overall, starts pulled back 32k units to 1,559k (annualized) in June, touching their lowest reading since last September. However, the entirety of the decline was attributable to weakness in the single-detached segment (-86k) as multifamily construction rose another 54k. The multifamily starts registered 577k units, and apart from April’s 632k and January 2020’s 601k, this is the strongest reading since the late 1980s. Permitting activity pulled back as well, falling 10k to 1,685k (annualized). Again, the multifamily segment showed ongoing strength, with permits rising 74k, while the single-family segment pulled back 84k.

Looking forward, there still looks to be healthy support for construction in the coming months. The pipeline of projects (as measured by units authorized but not started), is at a multi-decade high with a near even split between multi-unit and single-family structures waiting to get shovels in the ground (Chart 1) in further financial news. As raw materials prices come down, and supply chain issues gradually fade, the opportunity for more projects to get underway increases.

Financial Advisor Cornelius NC Financial News: Chart 2 shows the trajectory of existing home sales in the U.S.. The steep deterioration in the series after January 2022 shows how quickly the housing market has responded to slowing economic conditions. The dotted line shows the level of existing home sales as of June, at 5.120 million on a seasonally adjusted annualized rate.Indeed, more construction will be needed as this week’s existing home sales data showed there was roughly 3.0 months’ worth of inventory in the market – still below what is a balanced market. That said, amid falling affordability sales are slowing markedly. June’s existing home sales data reflect just that as sales fell to 5.1 million units (annualized) – the lowest reading since June 2020 (Chart 2). The slowdown in sales activity helped push the seasonally adjusted median sales price down 0.2% on a month-over-month basis. However, affordability continues to be stretched, particularly for the single-family segment. Combined with elevated mortgage rates this should continue to cool housing sales in the coming months.

Given the exuberance in the housing market over the past two years, the Fed’s mandate to fight inflation, and the strains on affordability, the slowdown in the housing market was expected. Indeed, residential investment is likely to contract well into 2023. That said, the moderation is simply helping bring the economy back to a pre-pandemic composition.

Despite the slowdown in the housing market the Fed will keep up its fight against inflation with another 75-basis point hike next week. The unemployment rate is still holding at 3.6%, while last week’s CPI print showed inflation hit 9% year-over-year in June. A strong labor market and inflation far from target means policymakers will continue working hard to keep inflation expectations anchored and bring down the pace of price gains.

Andrew Hencic, Senior Economist | 416-944-5307

 

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Financial News for the Week of July 15th, 2022

Financial News Highlights

  • Market sentiment soured this week on stronger than expected CPI data and a weak start to corporate earnings season.
  • US CPI accelerated in June, rising 1.3% m/m, pushing the year-ago measure to a new multidecade high of 9.1%. Core inflation accelerated by 0.7% m/m, as hefty gains were seen across both goods (0.8% m/m) and service (0.7% m/m) categories.
  • June retail sales surprised to upside, with both the headline (1% m/m) and control measure (0.8% m/m) recording decent nominal gains. However, sales were lower after adjusting for inflation.

U.S.-Gotta Bend Before You Can Break

Financial News: Financial Advisor Cornelius NC Chart 1 shows month-over-month gains in goods prices for new vehicles (May: 1.0%; June 0.7%), used vehicles (May: 1.8%; June 1.6%), Apparel (May: 0.7%; June 0.8%), home furnishings (May: 0.1%; June 0.5%) and recreational vehicles (May: 0.1%; June: 0.4%). Data is sourced from the Bureau of Labor Statistics.Market sentiment decisively shifted to risk-off mode this week, as a stronger than expected print on CPI and a weak start to corporate earnings season helped cast further doubt on the economic outlook in financial news. At the time of writing, the S&P 500 is down 2% on the week and has now had one of the worst starts to a year in nearly a century. The deteriorating market sentiment led to a further widening in the yield curve inversion – highlighting the growing fear among market participants that a recession may be on the horizon. The 10Y-2Y spread now sits at -20 basis points (bps). The sour market sentiment also spilled over to commodity markets, with WTI down 8% to $98 per-barrel on the week.

Any hopes of inflationary pressures easing in June were quickly dashed on Wednesday following the Bureau of Labor Statistics’ release of last month’s CPI data. Headline CPI accelerated by 1.3% month-on-month (m/m), pushing the year-ago measure to a new multidecade high of 9.1%. Indeed, with fuel prices having surged by 11% last month, and more recent gains in food prices showing incredible persistence, a further acceleration in the headline measure was inevitable. What was not anticipated, however, was the uptick in core inflation (0.7% m/m). Perhaps most disconcerting was the breadth in price gains across core, particularly among goods categories (Chart 1). Further gains in goods prices are at odds with more recent spending data, which has shown consumers pulling back on purchases of most discretionary goods in recent months. While inflation is notoriously a lagged indicator, it was thought that the combination of weakening demand and anecdotal reports of retailers carrying excess inventory would soon start to exert downward pressure on goods prices. That narrative has yet to come to fruition, and that detail will not be lost on policymakers when they meet later this month.

Financial News: Financial Advisor Cornelius NC Chart 2 shows the 3-month-moving average of the expected inflation rate over the next five years. The chart shows monthly data, going back to 2011. Since 2021, inflation expectations have moved sharply higher and now sit at 3.1% in July 2022. Data is sourced from the University of Michigan Consumer Confidence Survey.Perhaps one piece of encouraging news came from the July reading of the University of Michigan consumer confidence survey, which showed that expectations for inflation over the next five years now sit at 2.8% – down from last month’s reading of 3.1% (Chart 2). Chair Powell highlighted the recent upward drift in inflation expectations as being one of the key contributors in the FOMC’s decision to raise rates more forcefully in June. While the turn lower will provide some relief to policymakers, it won’t be enough to dissuade them from pushing ahead with another supersized hike later this month. This sentiment has been mirrored in market pricing, with odds a near coin toss on whether the Fed will raise by 75bps or 100bps.

The big question now is to what extent higher interest rates will ultimately weigh on domestic demand in financial news. Retail sales data for June showed that consumers are remaining somewhat resilient, with both headline (1.0% m/m) and the control (0.8% m/m) up on the month. That said, consumer spending is only tracking around 1% q/q (annualized) for the second quarter, which is a marked slowdown from the 4.5% averaged through the second half of last year. With inflation continuing to erode purchasing power and rates expected to move decisively higher through year-end, the hope is that consumers will only bend under the weight of the dual-income shock and not completely break.

Thomas Feltmate, Director | 416-944-5730

This Financial News report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this financial news report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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by Connor Hare

Featured Article: The Ingredients For A Happy Retirement

What’s the difference between a happy retirement, and a not-so-happy retirement? Financial planners have the unique perspective of seeing many clients retire over time, and as such they can differentiate what creates a happy retirement for most people. While what makes someone happy is always subjective, there are some generalities that play out across many successful retirees.

Planning

While good planning doesn’t guarantee a happy retirement, it might help you to feel more prepared for retirement. Planning ahead, both financially and emotionally for a big change in your life can help you to deal with the stress of the upcoming change, leading to an easier transition.

Mindset

Retirees that seem the happiest are those retiring to something and not from something. If you’re retiring just to escape a work situation you don’t like, or because it feels like that is what you have to do, your retirement situation might be less than idea. If you’re retiring because you’re ready to put work aside and travel or spend more time with your family, you’re likely to have a better outcome in retirement and feel happier and more fulfilled. Having the right mindset and attitude is great first step in embracing retirement and ultimately, in feeling happier throughout your retirement years.

Surrounding Yourself With Loved Ones

Surrounding yourself with those that you love seems like an optimal way to have a happier retirement. Many retirees choose to spend more time with their families, but don’t discount the extra time that you might have to spend with your friends. You could also spend this time making new friends and broadening your social circle. Spending time with people you care about is one way to improve your mood, particularly during retirement when you have the extra time to devote to your social life.

Relaxation

Happy retirees balance out the fun things that they’re doing with additional rest and relaxation. After a long span of working, a bit of relaxation is natural, and finding out the rhythm that best fits your new lifestyle will result in your own happiness. Some retirees prefer to sleep in, or nap during the day, whereas another retiree may prefer to wake up early and use mindful meditate to relax. Whatever relaxation methods work best for you, incorporating additional rest and relaxation time into your retirement schedule may increase your happiness during these years.

Travel

Retirees and travel go hand in hand, and it can be a great way to spend your time during your retirement years. Seeing new places and experiencing new cultures can cause great happiness for some people, while others may prefer to stay home and travel within their own city or state. From weekend trips, to cruises, RV excursions or sailing, there’s plenty to experience in the world and exploring it with a renewed sense of adventure may bring you great happiness.

Prioritizing Health

Without prioritizing health, retirement may not last as long as you’d like. Putting your own health at the forefront, with exercise, healthy eating, and whatever stress reducing activities area meaningful to you, may not only improve your mood and happiness, but improve your life in general during retirement.

Giving Back

Giving back to others, either through volunteering, charity, or mentoring, can be an immensely positive experience that can bring great joy for retirees. Often, retirees may have wanted to spend time volunteering or mentoring during their career but haven’t had the time, and this time of life is an ideal time to get started. Helping others can certainly improve your own level of happiness.

Do More Of What You Love

Retirement is all about you, and doing what you love. So naturally, now is the time to do more of it. If fishing is your thing, and that is what brings you happiness, then spend more time fishing. If you’re a gardener, spend more time in the garden. Lean into what brings you happiness, especially during retirement.

 

 

 

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by Connor Hare