Zacks Investment Management

This week’s Steady Investor highlights key market updates, featuring trends and insights that could shape future opportunities, including:

• The Fed’s inflation measure elevated in October
• Americans hold $35 trillion in home equity, borrowing costly
• The economic policy of tariffs takes shape

The Fed’s Preferred Inflation Gauge Remains Sticky in October – According to the Bureau of Economic Analysis, inflation rose at an annualized pace of 2.3% in October, with prices increasing 0.2% month-over-month. The high-level takeaway here is that inflation remains within arm’s length of the Fed’s target, but room for improvement remains. Of particular concern was the Core PCE price index, which strips out food and energy. That measure of inflation rose 0.3% month-over-month and 2.8% year-over-year, underscoring a stickiness that could give the Fed pause for cutting rates at the December meeting. In our view, the Fed is still on track to cut by 25 basis points in December, but may be more cautious in the new year as President-elect Trump’s economic policy agenda comes into focus.¹

Download Our Post-Election Economic and Market Outlook

With the U.S. presidential election behind us, the financial world has a renewed focus. While emotions run high, history shows that the stock market has no political preference—an important reminder for investors.

Our November 2024 Zacks Market Strategy Report² explores how the election results and the ongoing strength of the U.S. economy could shape investment opportunities in the months ahead.

This free report offers expert Zacks insights on:

• The U.S. election is over. Now what?
• The U.S. economy continues to grow at a healthy clip
• The “Magnificent 7 Stocks” continue to propel earnings, but growth is broadening
• The bottom line for investors

If you have $500,000 or more, fill out the form to receive your free report today!

Download Zacks “November Market Strategy Guide”²

Where Americans are Stashing $35 Trillion – American households have access to approximately $35 trillion of untapped cash. It just may not be the right time to borrow it. This treasure trove is not stashed in money market funds, CDs, or high-yield savings accounts. It’s in our homes. The issue at the moment is that the interest rates for borrowing this equity remain elevated, as rate cuts have not really translated to lower mortgage rates or interest rates on home equity lines of credit. Those rates hit 10% in December of last year and have pulled to about 8.6% so far in November, but they remain elevated relative to recent history: rates were closer to 6% between 2018 and 2019. This has resulted in a flat-lining of total home equity lines of credit, as seen in the chart below³: 

The good news for potential borrowers is that interest rates on home equity lines of credit tend to track closely with the benchmark fed funds rate, so if inflation continues to move lower and the Fed remains comfortable cutting rates further from here, those loans may become more attractive.

The Economic Policy of Tariffs Takes Shape – The “opening salvo” of trade policy has been floated by President-elect Trump. In a recent social media post, Trump indicated he would levy 25% tariffs on imports of all goods from Mexico and Canada on Day 1 of becoming president, in addition to the 10% increase on tariffs against China (there are currently average levies of 15% on Chinese goods). The question remains whether the tariffs are a negotiating tactic to pursue other goals on immigration and the flow of drugs, or if it’s part of a sustained campaign to reshape global trade and how the U.S. economy works. Mexican President Claudia Sheinbaum indicated that she would retaliate tit-for-tat, much like Mexico did in 2018 with duties on pork, cheeses, apples, and Bourbon from the U.S. A deal was eventually reached to drop those tariffs, and Nafta was renegotiated as the USMCA. Business leaders are anxiously awaiting more details on how and when the tariffs will be implemented, and what the responses from Canada, Mexico, and China will look like. Generally speaking, sustained tariffs would raise costs for companies who rely on imports, which would mean some or most of those costs would get passed along to consumers.⁵

Discover How Election Results Could Shape the Market – With the election behind us, it’s time to focus on what matters most—your investments. Markets often look past political outcomes to economic fundamentals, and the U.S. economy continues to show strength.

We recommend downloading our November Market Strategy Report⁶, which covers the following:

• The U.S. election is over. Now what?
• The U.S. economy continues to grow at a healthy clip
• The “Magnificent 7 Stocks” continue to propel earnings, but growth is broadening
• The bottom line for investors

If you have $500,000 or more to invest and would like to learn more, request this report today!

Disclosure