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Monthly Economic and Investment Outlook

September 2023 Economic and Investment Outlook

United States

stock market bull statue
  • Q2 real GDP growth was revised down from 2.4% to 2.1% in the first revision to the Q2 report on noteworthy revisions to private investments and inventories. Nominal growth was revised down to 4.1% from 4.7%. However, the price index was also revised down from 2.2% to 2.0%.
  • The headline Personal Consumption Expenditures (PCE) Price Index rose to 3.3% y/y in July from 3.0% in June, largely the result of less favorable base effects. Core prices rose from 4.1% to 4.2%, again the result of June’s 2022 high reading rolling out of the calculation.
  • The Manufacturing PMI contracted for the 10th consecutive month in August, registering 47.6%, 1.2 percentage points higher than the 46.4% in July. The survey results were mixed as gains were seen in production, employment, and supplier deliveries, while declines were experienced in new orders and inventories. Overall, manufacturing appears to be stabilizing.
  • The U.S. Leading Economic Index (LEI) fell 0.4% in July, marking its 16th consecutive decline. The Index has never fallen this far or for this long without a recession ensuing. The LEI on a year-over-year percent change basis is highly correlated with the M-PMI.

    MPMI and Leading Economic Indicators 
    Source: Nominal GDP – Oxford Economics

  • The labor market is overheating less. Nonfarm payrolls rose by 187k in August, while payrolls in June and July were revised down by a combined 110k. The three-month moving average increase in employment of 150k was the lowest since employment plummeted at the start of the pandemic.

    Nonfarm Payrolls

  • The unemployment rate rose to 3.8% from 3.5% the previous month, reflecting growth in the labor force (736k) and a sharp increase in the number of unemployed (514k) in the household survey. The labor force participation rate rose to its highest level (62.8%) since the start of the pandemic, with increases among all age groups.
  • Average Hourly Earnings (AHE) rose 0.2% in August, nudging down the year-over-year growth in AHE to 4.3% from 4.4% in July.
  • Another sign of labor softening is temporary workers, which are down 5.9% y/y and tend to lead payrolls going into a downturn. However, could this reduction be driven by temporary workers finding permanent work?
  • The ratio of job openings to unemployed workers fell to 1.5 with declines in the number of unemployed offset by the large drop in job openings, which fell to 8.8mm in July from a downwardly revised 9.2mm in June. Job openings remain roughly 2mm above the 2017- 2019 average.


  • The International Monetary Fund (IMF) projects that Germany will be the sole major economy to contract in 2023. Germany’s reliance on manufacturing and world trade has made it vulnerable as a result of supply-chain disruptions, surging energy prices, and higher interest rates that have led to a global slowdown.
  • The Eurozone manufacturing Purchasing Managers Index was revised down in August by 0.2 percentage points to 43.5% due to weakness in France. Germany’s manufacturing PMI was confirmed at 39.1%. PMIs are clearly in contraction territory, but according to Oxford Economics, may be showing tentative signs of bottoming.

    Eurozone Manufacturing PMIs

    Source: Oxford Economics/S&P Global


  • Eurozone inflation remains stubbornly high. The surge in energy and food prices that followed Russia’s invasion of Ukraine has left the eurozone with higher inflation and weaker growth than in the U.S. European Union’s consumer prices were 5.3% higher in August than a year earlier. Core inflation fell to 5.3% in August from 5.5% in July.
  • The Chinese economy struggled in August under the weight of a prolonged slump in the real estate market, sinking exports, reduced consumer spending, and painfully high youth unemployment.
  • According to Charlene Chu, a Senior Analyst with Autonomous Research, China is never going back to pre-pandemic growth levels. There are just to many structural issues. One significant headwind is the property sector, which holds 70% of Chinese households’ wealth. July’s existing home prices slid 9% month over month in big cities.
  • China’s key support measures announced since June 2023 have been wide-ranging, piecemeal, and are not likely to meaningfully stimulate economic activity. Several key stimulative measures include monetary policy (cut the Reserve Requirement Ratio by 25bps), property regulations (encouraging banks to increase lending to the sector and reclassifying qualified families as first-time homebuyers, a category that comes with lower mortgage rates and smaller down payments), and regulatory policy (support measures for the stock market, including cutting stock trading stamp duties).

    Oxford Economics

  • Non-financial debt reached 271% of GDP in at year-end 2022.

Fixed Income

  • The U.S. 10-Year Treasury yield, currently around 4.25%, is slightly below its 10-decade average of 4.62%. It appears as though interest rates are normalizing.

    Average US 10 year yield 
    Strategas Securities, LLC - Investment Strategy

  • According to Strategas, when interest costs are below 14% of net tax revenues, the U.S. is in a stimulative fiscal policy framework. Conversely, when interest costs exceed 14% of net tax revenues, fiscal policy moves into austerity. By their calculations, interest costs reached 14% of net tax revenue at the end of July.

    US Outstanding Sovereign Debt 

  • The Fed Funds futures market is pricing in a rate hike pause at the next FOMC meeting on September 19-20. Additionally, the futures market is pricing in a less than 50% chance of a rate hike at their October 31 – November 1 meeting. It appears as though rate hikes may be over. However, The Fed maintains its hawkish stance and data dependence in an uncertain world.
  • During his speech at Jackson Hole last month, Fed Chairman Jerome Powell noted “we are navigating by the stars under cloudy skies…we will keep at it until the job is done.” In other words, future rate hikes are not off the table.
  • What would it take for Powell and the Fed to become less hawkish? Powell implied he would be less hawkish if price inflation continued to fall toward the Fed’s 2.0% target, the supply of labor increases at a faster pace than the demand for labor, and consumer spending slows. He believes that monetary policy is on course to achieve this ideal outcome without a recession.
  • The weaker reading on consumer confidence may be another sign that balance may be returning to the labor market. University of Michigan’s U.S. consumer sentiment index remained below pre-pandemic levels and hit 69.5 in August.

Tactical Fixed Income Allocation

  • Neutral duration to the fixed income strategy’s respective benchmark as fixed income markets price in slower economic growth, lower inflation, and the Fed Funds rate approaching its terminal rate.
  • Slight overweight to short-term investment grade corporates - capture additional income with minimal incremental risk.

Equity Market

  • September has been the worst month for stock market performance on average since 1928. However, it has been up 45% of the time since then, with the up years averaging a monthly return of 3.2%.

    S&P 500 Index

  • During the down months, the S&P 500 averaged a monthly loss of 4.7%. On average, the S&P 500 has returned -1.1% in September since 1928.
  • S&P 500’s performance during past government shutdowns.


    The China growth story over the past several decades has been impressive, especially post inclusion in the WTO in 2001, but offshore investors have not been rewarded for the economic growth in China, which represents approximately 30% of the emerging market index.

    Annualized Total Returns in USD
    Strategas Securities, LLC - Investment Strategy

Tactical Equity Allocation

  • Overweight to U.S. Large Cap stocks with an emphasis on equities with quality, defensive, and strong cash flow characteristics.
  • Underweight to International Developed with no exposure to Emerging Markets. Although valuations remain attractive relative to U.S. equities, these asset classes may be pressured by slowing global growth and recessionary pressures..
  • Exposure to gold in an environment of high inflation, declining U.S. Dollar, and geopolitical tensions.
Notices & Disclosures
Past performance is no guarantee of future results. Products and services offered through F.N.B. Investment Advisors, Inc. are not FDIC insured; and are not insured by any Federal Government Agency, are not deposits or obligations of or guaranteed by First National Bank of Pennsylvania or its affiliates and may go down in value. The material has been extracted from various sources that F.N.B. Investment Advisors, Inc. believes reliable, but we cannot guarantee the accuracy or integrity of the material. This material is for your private information, and we are not soliciting any action based upon it. Any projections, market outlooks or estimates contained herein are forward-looking statements and are based upon certain assumptions. Other events that were not considered may occur and may significantly affect the returns or performance of these investments. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product or any non-investment related content, made reference to directly or indirectly herein will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. You should not assume that any discussion or information contained herein serves as the receipt of, or as a substitute for, personalized investment advice. To the extent that a reader has any questions regarding the applicability above to his/her individual situation of any specific issue discussed, he/she is encouraged to consult with their investment advisor. You can review your registered investment advisors or the investment advisory firm at the SEC's Investment Adviser Public Disclosure page -

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