Following a consequential meeting of the Federal Reserve last week, markets are expected to finish this week relatively flat, with the Nasdaq slightly finishing in the red. Last week went as expected with the Federal Reserve cutting rates by 25 basis points, which brings the current federal funds rate down to 4.00% to 4.25%. The surprise announcement, which is likely to affect the stock market for the remainder of 2025, was that Fed Chair Jerome Powell announced they expect to have two more rate cuts by the end of 2025. Along with this positive development, this week's economic data presented signs of strength and resilience, particularly in the consumer sector and the overall economy.
In economic news, new home sales were announced on Wednesday, having risen 20.5% in August to an annual rate of 800,000 units. This marks the fastest pace since early 2022. However, some economists recommend taking this data with a grain of salt as new home sales have a history of having extensive revisions. Initial jobless claims data came in on Thursday and fell to 218,000, well below estimates of 235,000. The third and final estimate of the second-quarter GDP posted a gain of 3.8%, reflecting a considerable increase of half a percentage point. This is most likely due to increased consumer spending. Personal consumption expenditure, which accounts for roughly two-thirds of the economy, increased by 2.5% in August, a significantly higher uptick than the 0.6% in the first quarter. Personal income growth also beat estimates, posting a 0.4% monthly increase.
Another signal of consumer strength was reported this week in spending on long-lasting items such as airplanes, appliances, and computers. This figure increased 2.9% in August, compared with estimates for a decrease of 0.4%. This significant uptick in spending has some economists attributing it to a decline in fear and uncertainty caused by the tariff rollout in the Spring. Lastly, the core inflation rate was posted this morning at 2.9% in August, matching estimates. With inflation in line with estimates, Fed officials, including Jerome Powell, suggested that tariffs may only cause a one-time price increase instead of an ongoing boost to inflation. Time will be the only test to bring clarity to this thesis of many officials.
In corporate news, Disney announced this week that it will be increasing the prices of many of its subscriptions, which will take effect on October 21. The Disney+ ad-supported plan will increase from $9.99 to $11.99 per month, while the premium ad-free plan will increase from $15.99 to $18.99 per month. Although many Disney fans may be less thrilled by this announcement, the price increase closely follows the pricing for Netflix, which is $17.99 per month for its standard service. Spirit Airlines made headlines this week by announcing its plans to furlough 1,800 flight attendants due to its second bankruptcy within the last year. Spirit Airlines also aims to reduce pilots' union-negotiated salaries to generate $100 million annually in savings. Also known for its fair-priced flights is the U.S., startup airline company, Breeze Airways, announced this week its plans for international flights starting next year. Entering its fifth year of flying, Breeze Airways fares go as low as $39, and round-trip fares start around $60-$80. In 2026, its international flights, starting as low as $99 one way, will be available to Cancun, Mexico; Montego Bay, Jamaica; and Punta Cana, Dominican Republic.
In closing, we turn our attention to the fastest-growing sport in the United States: Pickleball. This is a racket sport that's very similar to tennis, except the court is smaller (78 feet by 36 feet, compared to 40 feet by 20 feet), the rackets are mid-size paddles, and the balls are plastic. What makes this sport unique and attractive to many is its lack of technical expertise needed to play; its games are fast-paced and social, and it is a lot of fun. Although the largest demographic is 25-34, it is very popular among all ages, and even players aged 65+ form roughly 17% of the players. In the last three years alone, the number of pickleball players has increased from 8.9 million to 20 million, representing a 50% annual growth rate. The sport has also received a massive boost from numerous celebrities' significant investments in the sport, including those of Tom Brady, LeBron James, and Michael Jordan. Other celebrities who have found themselves caught up in the pickleball craze include Drew Brees, Will Ferrell, Leonardo DiCaprio, and George Clooney.
Ryan Motsinger
