This week’s Steady Investor highlights essential market updates that every investor should keep an eye on, including key trends and insights poised to shape future opportunities, like:
The International Monetary Fund Thinks the World’s Inflation Problem is Over – The IMF released new economic forecasts this week, and the message was clear: the global economy has managed to escape the surge in inflation—and the higher interest rates that accompanied it—without experiencing a recession. Without using the phrase, the IMF laid out the case for a “soft landing,” projecting that global GDP would hold steady at 3.2% in 2024 and 2025, while inflation declines to 3.5% by the end of next year—down from 5.3% this year and a peak of 9.4% in 2022. A GDP growth rate of 3% is healthy for the global economy, and the 3.2% inflation rate, if achieved, would be lower than average inflation from 2000 to 2019. However, the IMF cited several risks to the forecast that could play out in the new year. Among them, are escalating wars in Ukraine and the Middle East and a sharp pivot to protectionism via tariffs and trade wars, which could disrupt supply chains and raise costs. The overall picture being painted of the global economy is one of “goldilocks” economic fundamentals with widely known risks, which we overall view as positive for equity markets.1
How Lower Rates Could Impact the Stock Market
The Fed’s recent 50-basis point rate cut has stirred optimism, but the link between interest rates and stock performance isn’t always straightforward.
Our October Market Strategy Report2 dives into this complex relationship, examines the Q3 2024 earnings season, and explores how lower rates could affect various sectors. You’ll have access to insights, like:
If you have $500,000 or more, fill out the form to receive your free report today!
Download Zacks “October Market Strategy Guide”2
Gold Prices Set New Records, But Still Aren’t Sound Long-Term Investments – The precious metal has been in rally mode recently, hitting new record highs and rising in 10 of the last 12 weeks. There’s much speculation about the root causes of gold’s ascent—the possibility of rising deficits and higher inflation due to the policies of either the U.S. presidential candidate, or the inverse, where rate cuts could weaken the dollar and therefore boost commodities. For close readers, it seems like the case is being made that gold will rise no matter what the economic future holds, which underscores a key issue with the precious metal—its price is largely driven by sentiment. Consider that fundamental analysis largely does not apply to gold because it can’t—gold does not generate earnings, it does not pay dividends, and it does not create new products and services that add value to the economy. It follows that since becoming freely traded in 1974, gold has been highly volatile and also a poor performer relative to stocks and bonds. U.S. stocks’ outperformance of gold over that time is nowhere near a close race, and bonds have doubled the performance of gold since 1975. For investors seeking to generate solid positive returns from investment in gold, it’s been all about precision, often short-term timing, the opposite of the long-term approach we think most investors need.
Home Sales Decline, Again – The National Association of Realtors reported that existing home sales fell in September, which puts 2024 on track to be the worst year for existing home sales since 1995. September sales fell 1% from August and 3.5% from September 2024, which was approximately twice as weak as economists were expecting. Elevated mortgage rates continue to be the thorn in the housing market’s side—even though the Federal Reserve cut rates by 50 basis points and the 30-year fixed mortgage rate fell to approximately 6% last month, it came too late in the home buying season to make a big impact. Many families tend to want to move between school years, which means buying in the spring. Mortgage rates may see a bit more reprieve in the next year, if inflation continues to trend lower and the Federal Reserve continues on a path of monetary easing.4
Unlock the Hidden Impacts of Rate Cuts on Your Investments – While many see the recent rate cut as a positive for stocks, history shows that the relationship between interest rates and market returns can be more complicated.
Our October Market Strategy Report5 dives into this dynamic, examining how macroeconomic fundamentals shape market direction and offering insights on the upcoming Q3 2024 earnings season. You’ll have access to insights, like:
If you have $500,000 or more to invest and would like to learn more, request this report today!
Disclosure