The complete story for markets and the economy right now: Morning Brief

Myles Udland
·Head of News
Updated 3 min read
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This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:

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The US economy continues to impress.

And we think there is a fairly straightforward, fundamental story that explains why we stand where we stand in July 2023.

"In the last couple of months, I think consumers are feeling pretty great," SoFi's head of investment strategy Liz Young told Yahoo Finance Live on Tuesday. "The market is up, inflation is down, they still have a job."

The backbone of any economic expansion is the labor market. And the US labor market today continues to grow while unemployment remains near multi-decade lows.

Inflation pressures are also ebbing after eye-watering price increases hit consumers last year.

And while economists prefer to look at inflation measures excluding food and gas prices — which can be more volatile — household budgets are heavily impacted by these two items.

In May, energy prices were down 16.7% from the prior year while food prices rose 5.7% over last year, a moderation from the 10.1% jump in food prices seen at the start of the year.

All of this has boosted consumer sentiment, which approached a two-year high in last week's sentiment reading from the University of Michigan.

And as the economy hangs in, so too has the stock market challenged the consensus view at the start of 2023 that another shaky year was in store for the US equity market.

Strategists and analysts across Wall Street, in turn, have revised up their expectations for stocks this year.

And when it comes to the US consumer, it is hard not to doubt your doubts.

Retail sales data for June came in slightly below estimates, but revisions to May's data released Tuesday show consumption continues to grow at a steady rate as recession forecasts are pushed off.

GLENDALE, CALIFORNIA - FEBRUARY 15: American flags fly near new Chevrolets displayed for sale in a Chevrolet dealership on February 15, 2023 in Glendale, California. The Commerce Department released data today showing that retail sales saw a three percent jump in January, the biggest gain in almost two years. Sales increased 6.4 percent at automobile and other vehicle dealers. (Photo by Mario Tama/Getty Images)
American flags fly near new Chevrolets displayed for sale in a Chevrolet dealership on February 15, 2023 in Glendale, California. (Photo by Mario Tama/Getty Images) (Mario Tama via Getty Images)

As economists at Wells Fargo wrote Tuesday following the retail sales data: "The trend is stubbornly good."

"The more recent bounce in retail sales is encouraging and suggests spending remains resilient headed into the second half of the year," the firm added. "In some ways, we're ready to wave away the near-term bounce as base effects after consecutive soft months of spending, but we're weary to doubt households' resiliency."

To wit: The economics team at Goldman Sachs earlier this week lowered their 12-month recession probability to 20% from 25%; in March, the firm saw a 35% chance of the economy tipping into recession.

Some of this year's story for investors who track things like economic and stock market forecasts is that the folly is the forecast itself. As the old saying goes, predictions are hard to make, especially about the future.

Figuring out the present, however, isn't quite such a fool's errand.

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