Making Money Moves: August 2023 Economy Snapshot

The August economy is representative of how markets have behaved throughout 2023. The overall trend supports the post-COVID-19 recovery narrative, but businesses and consumers are still navigating an uncertain environment and feeling the effects of inflation.

Overview of the Economy

Inflation is slowing down, but it remains a significant concern, especially as the job market shows signs of cooling off with fewer job openings. July also saw the seventh consecutive federal rate hike, placing the target rate between 5.25 and 5.50%.

Stock Market

Historically, August is always a slow month for financial markets. The past four weeks have been no exception, with the S&P 500 dropping by more than 3%.

Trading volumes usually drop as traders take a break to enjoy the summer, but we’re also seeing concerns that the market was rising too quickly and was due for a correction. A disappointing financial report from Nvidia put a damper on a potential rally around tech stocks, and traders are also being cautious as they expect another federal rate hike in September.

Inflation

With a 2.4% GDP growth for Q2 2023, it’s safe to say that inflation has started slowing. Consumer spending increased over the summer but decreased from 71.6 index points in July to 69.5 in August.

Oil Prices

Oil prices have been steadily increasing for the past eight weeks. Global demand is higher than ever, partially due to China continuing to roll back its COVID-19 restrictions.

Oil production peaked in August, but prices remained high and climbed to slightly less than $79 a barrel on August 22nd.

Precious Metals

The August economy remains uncertain, and it’s no surprise that precious metals are among the top-performing assets. Some experts believe prices will continue rising.

Despite a strong year, precious metal prices slightly dropped in August, with a 2.33% loss for gold and a 2.55% drop for silver.

Cryptocurrency

The cryptocurrency world is still reeling from the SEC filing a lawsuit against Binance and its associated companies in June 2023. The crypto market is going through a period of uncertainty, and trading volumes have remained low throughout the summer.

July has been slow with a 1% increase in crypto market capitalization, NFT trading slightly dropped, and total trading volumes are down one-third compared to 2022. Bitcoin remains one of the most substantial crypto assets, with a value that reached $26,500 on August 24th.

Financial Planning Strategies

The August economy paints the picture of a country going through a period of volatility and uncertainty. It’s no wonder that 70% of Americans report experiencing financial stress.

Adopting the right financial strategies can make navigating this environment easier and help you build a financially sound future:

The job market will likely cool down in the near future. Don’t wait if you’ve been thinking about a career change.
The same applies to interest rates. An eighth consecutive hike is likely coming in September. Shopping for loans now can help you save.
The stock market performance continues to be volatile. Protect your investments by building a diversified portfolio that exposes you to various industries, business sizes, and investment vehicles.
AI could create value in several industries soon. Even though there is a risk of an AI bubble forming, it could drive growth in some sectors like tech and healthcare.
High-yield savings accounts, Certificates of Deposit, and government bonds remain some of the safest ways to invest.
Prioritize saving and building an emergency fund to protect yourself from unforeseen expenses.
High interest rates create an environment that isn’t favorable to borrowing. Consider saving for major purchases instead of applying for a loan or opening a new credit card.

Benefits of Making Smart Money Moves Now

The August economy snapshot shows an uncertain environment. The Congressional Budget Office predicts a GDP increase of 2.4% by 2025, and experts agree that post-COVID-19 recovery will happen in a few years.

However, making predictions for the immediate future is difficult outside of an additional federal rate hike. Adopting a proactive attitude about your finances is the best way to create a clear path forward and achieve your short and long-term goals.

Resources

Knowledge is an invaluable resource when navigating a challenging economic environment. Here are some sources you can use to keep up with the latest developments and increase your financial literacy:

Conclusion You Need a Budget

While the August economy snapshot remains mixed, inflation shows signs of slowing down, and stock market losses are partly due to August traditionally being a slow month.

As a consumer, investor, or business owner, the best thing right now is to exercise caution, play a more active role in managing your finances, and look for strategies to protect you from a volatile and uncertain environment.