Macro Briefing: 29 August 2022

* Federal Reserve Chairman Powell says fighting inflation will bring ‘some pain’
* US gross domestic income suggests an economic stall vs. GDP recession
* Sen. Warren “very worried” that Fed rate hikes will “tip economy into recession”
* EU faces five to 10 terrible winters without cap on gas prices, says minister
* Economists cut growth outlook for China economy for full-year 2022 results
* US dollar reaches 20-year high amid expectations for more rate hikes
* German foreign minister says war in Ukraine “could last years”
* China push to become tech self-reliant remains an uphill battle
* Does Friday’s market rout point to a rough road ahead for stocks?
* US consumer spending growth slowed to a 7-month low in July:

US household cashflow has been weak recently, but is expected to bounce back in 2023, predict analysts at Goldman Sachs. “This year, we’re looking at negative discretionary cash flow for the first time since the 2008-09 financial crisis,” advised Goldman consumer goods analyst Jason English recently. If correct, the forecast suggests retail spending will strengthen. The key driver for the expected recovery in household cash flow: wages, says English. Mark Zandi of Moody’s Analytics agrees: “Cash flow got hit during 2022 but it’s coming back, and cash flow is what drives spending. Businesses are unlikely to cut jobs because they know their biggest problem is finding workers.”

What’s the best investment advice to succeed in the stock market? Buy and hold, advises New York Times financial columnist Jeff Sommer. “With the method I’m recommending, you don’t need to be right about much. You’re just betting that the economy will grow over the long run and that the stock market will capture some of that growth,” he writes. “Follow my lead and you can disregard the market’s short-term vagaries. Keep putting money into your index funds, especially when the market falls, and you will benefit from lower prices and bolster the overall returns that you will earn over decades.”