Weekly Macro Minute

GuideStone Reflections

Paul stayed two whole years in his own rented house. And he welcomed all who visited him, proclaiming the kingdom of God and teaching about the Lord Jesus Christ with all boldness and without hindrance. (Acts 28:30 – 31, CSB)

Luke ends the book of Acts with a cliffhanger. After his third missionary journey, Paul visited the Temple in Jerusalem. While he was there, some of his enemies falsely accused him of bringing Gentiles into the restricted areas, thus defiling the Temple. An enraged mob dragged him out of the Temple to kill him, but the commander of the Roman battalion quelled the riot by arresting Paul. From there, the wheels of Roman justice ground slowly. For over two years, he was stuck in protective custody. After finally appealing to Caesar himself, he was transferred to Rome to wait for another two years. The book of Acts ends with Paul still under house arrest and awaiting his audience with the emperor. Readers are left to wonder what happened next.

So, what are we to make of the open ending of Acts? At the beginning of the book, Jesus tells his disciples that they will be his witnesses “to the ends of the earth.” By the end of the book, their witness had made it to Rome. Now, Rome is a long way from Jerusalem but it’s nowhere near close to the ends of the earth. The gospel still had a long way to go – and that’s Luke’s point. By ending Acts on a cliffhanger, he draws us in, reminding us that the advance of the gospel is an ongoing process. The Great Commission is renewed for every generation. We are writing Acts 29 today. Jesus has charged all of us to keep the gospel moving forward.

In the Economy

Good news continued to be interpreted as bad news by the markets as curiously resilient U.S. economic data signaled that the Federal Reserve has much more room to increase interest rates in its quest to bring inflation down to the target 2%. The biggest news was Friday’s jobs report with anxiety over its release weighing on markets throughout the week. The report showed that the economy added 315,000 jobs last month, which is a solid number but down from 526,000 in July. Markets were up strongly on the news but faltered by midday and performed a round trip to end deeply in the red by market close. The latest Institute for Supply Management manufacturing release showed U.S. manufacturing grew steadily in August as new orders rebounded.

European stocks logged a negative week as well as fear over central banks continuing down a path of tightening for the foreseeable future chilled market activity. The UK pound posted its steepest monthly drop versus the U.S. Dollar since October 2016 (just after the Brexit referendum) as economic and political uncertainty abound. Eurozone inflation surged to a record 9.1%, moving market expectations of a 75-basis point hike by the European Central Bank to 80%. On Friday, Russia announced it would not bring gas shipments back online, prompting emergency meetings in Europe over the weekend to further address soaring energy costs. Japan’s markets fell almost 3.5% on the week and the Yen traded at its lowest level versus the U.S. Dollar since 1998. China’s markets caved as COVID outbreaks continued in major cities.

Coming out of the most recent bear market rally, the market has clearly exhausted its glass half full rationale for continuing its upward march without first taking some pain to the downside. Talk of a “soft landing” seems to have largely dissipated as the talking heads have turned to a “growth recession” as a best possible outcome. A growth recession is characterized by a protracted period of meager growth and rising unemployment. As we have said before, we are in for a sustained period of economic weakness with the primary question being if the Fed will stay on its aggressive tightening course or will it pivot as economic conditions worsen.

Across the Markets

• The S&P 500® Index continued its downward trajectory and ended the week below the 4000 level.
• Value stocks continued their strength against growth stocks while large caps held up better than small caps.
• Energy was one of the worst performing S&P 500® sectors as oil closed at just over $87/bbl.
• The two-year U.S. Treasury yield continued its push upward and touched 3.5% – a level not seen since November 2007 – while the 2/10 yield curve inversion relaxed somewhat but remained in place at 20 basis points.
• The Atlanta Fed’s GDPNow model’s estimate for U.S. real GDP growth for the third quarter of 2022 rose to 2.6% while the range of forecasts remained steady from approximately 2.75% to -0.25%.