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China slowdown.

The headline that China, the world’s second largest economy, is slowing down may initially create some heartburn for investors. A deeper dive shows that there may be some silver linings derived from the weakness.

A few reasons why: (1) The U.S. economy does not seem to have significant exposure to the Chinese markets suffering the most, namely real estate and the associated debt; (2) The slowdown in consumption due to Chinese weakness could end up helping alleviate pressures on inflation here in the U.S; and (3) Companies have already been moving their supply chains to other countries as the geopolitical risks continue to grow between China, Taiwan, and the U.S.

Peak interest rates (perhaps).

Are we at or near peak interest rates and what does that mean? Perhaps the abrupt rise in rates we have experienced for the past year+ may finally come to an end. This doesn’t mean rates are set to drop in the near term though.

Comments from the Federal Reserve indicate we are in a period of “wait and see“. The option of more rate hikes is still on the table, and rightly so. But the commentary is pointing toward being at or near the point of holding rates steady. 

August market doldrums.

The markets did regress this month from the hot start of 2023, which is not atypical at this time of year as lower trading volumes and other seasonal factors take a toll. The worries over China and higher rates were the sustaining themes leading to lackluster performance. September may offer some of the same seasonal factors as August, which is entirely normal. Overall, the strong consumer, business investment, and low unemployment rate are offering a strong foundation for companies to continue to succeed into year end.