Despite inflation stubbornly above the Federal Reserve’s target, we still see future progress on inflation while the market is still calling for no interest rate hike at the September FOMC meeting. The labor market indicators remain healthy, coupled with slowly receding inflation, suggest that a soft landing for the economy can still be achieved.


While September is historically a weak month for stocks, we remain encouraged that major support levels are holding and that economically cyclical sectors continue to show leadership.

Inflation Remains Stubbornly Above the Fed’s Target

A surge in gasoline prices in August boosted headline inflation. Core inflation (excludes food and energy) continued to moderate, largely driven by slower price growth in core commodities prices, including another decline in used car and truck prices. On a y/y basis, CPI picked up 3.7% from 3.2% in the prior month, core CPI eased to 4.3% from 4.7% in the prior month, the slowest pace since September 2021.

While inflation remains stubbornly above the Fed’s 2% target, important components of inflation, including shelter inflation which has a 44% weight in the core, suggest further disinflation to come. Indeed, the market is assigning a 97% probability of no rate hike at the September 20th FOMC meeting.

Labor Market Indicators Remain Healthy

A soft landing for the economy is predicated upon reducing inflation back to the Fed’s 2% target while still maintaining enough health in the labor market to support future economic growth. Consequently, we are paying close attention to labor market indicators in addition to inflation readings.

Encouragingly, labor market indicators remain healthy, despite job openings falling off record highs and new hiring losing momentum. Weekly jobless claims are a timely and accurate labor market indicator, and with this week’s initial claims for unemployment insurance at 220,000, they remain historically low. In addition, the Manpower Employment Outlook Survey for the fourth quarter showed continued strengthening in hiring plans. The net share of employers expecting an increase in hiring activity rose to 36%, up for the third consecutive quarter. Hiring plans are stronger than in any other expansion since 1976. These and other indicators show that labor demand is still robust, consistent with continued economic growth over the near term.

Small Business Optimism Remains Below Historical Average

The NFIB Small Business Optimism Index fell in August, down for the first time in four months. It has been range-bound since mid-2022, which is well below the historical average and below the level at the start of the last recession. The index dipped 0.5% from a year ago, consistent with some deceleration in economic activity this quarter. Labor quality and inflation continued to head the list of small firms’ most important problems, followed by taxes.

Stocks Continue to Consolidate Gains

Historically, September is a weak month for stock performance and it’s typical to see stocks consolidate gains after big upward moves. Consequently, we remain encouraged that major support levels are holding and that cyclical sectors continue to show leadership.

This report is provided for informational and educational purposes only and shall in no event be construed as an offer to sell or a solicitation of an offer to buy any securities or a recommendation for any strategy or to buy, sell, or hold any product. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed here. The information described herein is taken from sources which we believe to be reliable, but the accuracy and completeness of such information is not guaranteed by us. The opinions expressed herein may be given only such weight as opinions warrant. This Firm, its officers, directors, employees, or members of their families may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis. This report is the intellectual property of Janney Montgomery Scott LLC (Janney) and may not be reproduced, distributed, or published by any person for any purpose without Janney’s prior written consent. This presentation has been prepared by Janney Investment Strategy Group (ISG) and is to be used for informational purposes only. In no event should it be construed as a solicitation or offer to purchase or sell a security. Past performance is no guarantee of future performance and future returns are not guaranteed. There are risks associated with investing in stocks such as a loss of original capital or a decrease in the value of your investment. For additional information or questions, please consult with your Financial Advisor.

About the author

For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.

To learn about the professional background, business practices, and conduct of FINRA member firms or their financial professionals, visit FINRA’s BrokerCheck website: