In this edition of Steady Investor, we explore three emerging trends that could impact your investments:
- The IPO market becomes hesitant
- The rise in U.S. consumer confidence
- China’s weak consumer economy
The U.S. IPO Market is Sluggish – September is generally a popular time for companies to make an initial public offering (IPO), as they can revamp market momentum after a slow summer and use the final months of the year to generate investor enthusiasm. August volatility put many of those plans on hold. Year-to-date, U.S. IPOs have raised about $25 billion, which is far below the $55 billion annual average posted over the past decade. Consensus among bankers and executives shows that companies are opting to wait until next year, as August’s sudden volatility rattled many investors and now the looming U.S. election only adds to the uncertainty. Many investors were hoping that 2024 would revitalize the IPO market that has been chilly since 2021, when the Fed announced it would start raising rates. But that outcome has not happened yet.1
Bond Ladders in an Uncertain Interest Rate Environment
Interest rates dropped to near zero during the pandemic. But as we all know; this was followed by high inflation. While this situation may not seem ideal, it creates opportunities for fixed-income investors.
Our guide, Bond Ladders in an Uncertain Interest Rate Environment2, looks at how bond ladders can help you navigate this volatility. You’ll gain valuable insights, including:
- What is a bond ladder, and how do they work?
- How to construct and manage a bond ladder
- The pros and cons of bond ladders
- Bottom line for investors
If you have $500,000 or more, click the link below to download your free guide today!
Get Our FREE Guide: Bond Ladders in an Uncertain Interest Rate Environment2
U.S. Consumer Confidence Rose in August – Americans are still generally skittish about the current economy and their economic prospects looking forward, but the outlook improved in August. The Conference Board reported that the consumer confidence index rose from 101.9 in July to August 103.3, and short-term expectations for income and the job market also rose and were revised higher for July. For five months, American’s short-term expectations for the jobs market and wages were below 80, which has historically been a signal of recession. This improvement comes as the unemployment rate has risen above 4%, but mostly because more workers have come off the sidelines in search of work.3
China Has a Weak Consumer Economy. That’s Bad for the Rest of the World – The American consumer contributes about 70% of output for the U.S. economy, via spending. In China, that figure is closer to 40%, and China makes up the difference by exporting what its consumers don’t buy. Most developed economies are powered by domestic consumption, but China continues to favor investment in domestic production, property, exports, and infrastructure. That’s not beneficial for the rest of the world, since China’s annual trade surplus of $900 billion means the world is flooded with cheap goods, which hinders the ability of domestic producers in other countries to compete. This is not just a problem for the U.S. China runs a trade surplus with the European Union, Japan, and a $240 billion surplus with the rest of the world. All told, China accounts for just 13% of the world’s consumption but 28% of its investment, which might help consumers in the form of cheaper goods but dents the broader economy because of its impact on jobs and manufacturing.4
Navigating Today’s Interest Rate Environment – Many investors are wondering how to navigate this high-interest rate environment.
We recommend understanding bond ladders and how using them in your fixed-income strategy can help you manage risk in today’s uncertain interest rate environment. To do so, we’re offering our free guide, Bond Ladders in an Uncertain Interest Rate Environment5, which covers:
- What is a bond ladder, and how do they work?
- How to construct and manage a bond ladder
- The pros and cons of bond ladders
- Bottom line for investors
If you have $500,000 or more, click the link below to download your free guide today!
Disclosure
1 Wall Street Journal. August 27, 2024. https://www.wsj.com/finance/stocks/the-ipo-market-gets-cold-feet-80222c4c
2 ZIM may amend or rescind the guide “Bond Ladders in an Uncertain Interest Rate Environment” for any reason and at ZIM’s discretion.
3 AP News. August 27, 2024. https://apnews.com/article/consumer-confidence-conference-board-economy-spending-3dfae1c18dba90aaeba2b5a4e3ce9567
4 Wall Street Journal. August 29, 2024. https://www.wsj.com/economy/global/theres-a-china-shaped-hole-in-the-global-economy-c8a40f06
5 ZIM may amend or rescind the guide “Bond Ladders in an Uncertain Interest Rate Environment” for any reason and at ZIM’s discretion.
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