With two favorable economic data, US stocks ushered in a “strong smooth wind”!

Consumer confidence in the US continued to rise in late September due to optimism about the economic outlook, reaching its highest point in five months. This is partly due to the positive impact of the Federal Reserve's interest rate cut.

The final value of the University of Michigan's confidence index for September rose to 70.1, higher than the initial value of 69 announced earlier this month. According to the latest data released last Friday, the index for August was 67.9.

Consumers expect prices to rise at an annual rate of 2.7% over the next year, the lowest level since late 2020 and lower than the 2.8% forecast last month. They think inflation will rise by 3.1% in the next five to ten years.

The increase in confidence is related to the Federal Reserve's decision to cut interest rates by 50 basis points on September 18, a move aimed at preventing the deterioration of the job market. Further reducing borrowing costs can help support consumers' views on the economy and their personal financial situation.

Earlier this Friday, government data showed a slight increase in household spending in August.

Although expectations at the beginning of the month showed some concerns about the labor market, consumer perception of unemployment improved in the weeks that followed, the University of Michigan report showed. To a certain extent, this reflects the decision of the Federal Reserve to cut interest rates.

Approximately 55% of respondents expect borrowing costs to drop over the next year, the largest percentage on record. This has led to an improvement in the perception of conditions for buying large items and homes, the most optimistic since April.

“Confidence appears to be gathering some momentum as consumer expectations about the economy become brighter,” investigation director Joanne Hsu said in a statement. “Meanwhile, many consumers continue to report that their expectations depend on the outcome of the upcoming general election.”

Consumer confidence among Democrats rose to its highest point in five months in September, while confidence among Republican and independent voters also rose slightly.

The University of Michigan's indicators rose to a three-month high of 63.3, while the Expectations Index rose to its highest level since April.

Consumer expectations for their financial situation reached a four-month high in September. Their outlook on the economy in the coming year is the most optimistic since March.

Furthermore, the Federal Reserve's favorite personal consumption expenditure price index (PCE) showed a cooling in inflation earlier. According to Chris Zaccarelli, chief investment officer of the Independent Advisors Union, based on Friday's PCE data, US inflation appears to be declining, which is a positive development for the market.

According to the PCE report, US inflation rose slightly by 0.1% in August, and the same ratio slowed to 2.2% from 2.5% in July.

In an email comment on Friday, Zaccarelli said: “As long as inflation remains manageable — which is our current trend — the Federal Reserve can focus almost entirely on the labor market, which means a trend of cutting interest rates. As the Federal Reserve cuts interest rates — especially without recessionary growth — this will be a strong tailwind for the stock and bond markets, and ultimately provide some relief for consumers who are more sensitive to interest rates.”