The S&P 500 fell marginally on Friday but ended higher for the week after recording gains in three out of five sessions aided by strong macro data. The Dow Jones Industrial Average posted its 32nd record close for the year on Friday as the latest inflation data indicated further price cooling in August, lifting expectations for additional interest rate cuts by the Federal Reserve. The S&P added 0.6% for the week, while the Nasdaq Composite advanced 1.0%, and the Dow gained 0.6%.

The market appears to be driven higher by consumer confidence. US consumer sentiment continued to rise in late September, reaching a five month high on more optimism about the economy in the wake of the Federal Reserve’s interest rate cut. Further reductions in borrowing costs are helping to underpin consumers’ outlook on the economy and their personal finances.

Applications to refinance mortgages surged for a second week as more Americans capitalized on the cheapest borrowing costs in two years. The Mortgage Bankers Association’s refinancing index jumped 20.3% to the highest level since April 2022. The rate on a 30 year fixed mortgage eased 2 basis points to 6.13%, the eighth straight weekly drop and the longest stretch of declines since 2018-2019. That helped boost the group’s home purchase applications index by 1.4% last week to the highest level since early February.

Future Wealth’s View

While data on the domestic front continues to be positive, we finally had some good news from China this week. Chinese central bank policymakers have come out swinging. They slashed the reserve requirement ratio to the lowest level since at least 2020, as well as trimming its short term interest rate. The package also targeted the nation’s beleaguered property market, with measures to lower overall mortgage costs and eased rules for second home purchases. 

In what amounts to a massive adrenaline shot for the world’s second biggest economy, it remains to be seen if they can make it attractive to invest in China again. China’s economy has been dogged by a property market crisis, consumer price weakness and rising global trade tensions. China’s economy sits dangerously close to a deflationary cycle and innovation in China has all but disappeared.

With the S&P 500 up 20.3% year to date and 92.7% over the past five years, even looking at investing in anything beyond the US stock market is a head scratcher.