The unofficial end of summer is upon us, and save for a few fleeting days of volatility, it was a fruitful season for diversified investors. Even so, a few storm clouds have begun to descend, with unemployment rising and earnings revisions turning mildly negative.

Poor affordability is a large part of the story of poor home sales growth this year. But it’s not the whole story. No other segment of the U.S. economy has experienced a stranger landing than the U.S. housing market. So, let’s fly over the rainbow and explore what’s happening and how it informs our outlook.

Despite the pleas and pricing for swift action to resolve being behind the curve, it’s now more likely the Fed will move with “Slow Hands” as it begins to ease policy in September.

After a weak of equity and bond markets being whipsawed by positioning, economic narratives, and Fed expectations, it is helpful to take a step back, “cut through the noise” (as Bloomberg’s Tom Keene would say) and focus on the fundamentals.

Investors were reminded of a valuable lesson this week: falling interest rates can be good for risk assets but only up to a point and only for the right reasons.

U.S. politics has been delivering more twists and turns lately than even the most melodramatic arc on The West Wing. And yet, diversified investors have come through the chaotic headlines mostly intact.

Harry Truman once asked to be sent a one-armed economist, frustrated with the profession’s propensity to condition every assessment with “on the one hand this… while on the other hand that…”.

While equity investors have not yet seen downward GDP revisions as a reason to turn cautious (likely because they also brighten hopes for rate cuts), corporate credit spreads are now several months removed from their 2-year lows. We are becoming concerned that High Yield credit, in particular, may be on the “Highway to the Danger Zone”.

For the first time in over twelve months, U.S. GDP forecasts for 2024 have been trimmed, and with these cuts the “new dawn” has faded for continued growth acceleration in the U.S.