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June 2024 Monthly Market Update

The post-COVID economic recovery has been notably uneven, often described as “K-shaped”, due to the divergence in economic realities for Americans. Those with substantial assets and high incomes have largely done well. Homeowners with low mortgage rates and no need to take on debt have been insulated from higher interest rates. Strong stock market returns and rising home values since 2020 have boosted wealth for those with assets. Surging grocery, energy, rent, and other inflationary categories eat up much more of lower-income consumers’ wallets. As the chart below shows, inflation significantly outpaced wage growth in 2021 and 2022. Rising home prices combined with higher mortgage rates have pushed homeownership out of reach for many would-be first-time buyers. Rising interest rates can have a more direct impact on the less wealthy who tend to rely more heavily on auto loans and credit card debt.

Recent trends, however, suggest potential relief for those left behind. Median wages have been outpacing overall inflation, as the chart below shows. Stabilizing energy and food commodity prices and a record number of new apartments entering the market this year may ease cost-of-living pressures. Continued tightness in the labor market and the prospect of lower interest rates could further improve economic conditions for the broader population. This shift towards more widespread economic growth is worth watching. Better economic conditions for Americans hit hard by inflation in recent years could lift consumer confidence, improve overall economic growth, and boost financial markets.

-Jared J. Ruxer, CFA, MS

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