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March 27th, 2024

Navigating Global Rate Cuts And Maximizing Investment Potential

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Derrick V. from Los Angeles, CA asks: Hello Mitch, Curious if you think global stocks could get some upside support in 2024 as central banks around the world start loosening. Is it a year when investors shouldn’t fight global central banks?

Mitch’s Response:

Thanks for sending your question, Derrick. 2024 is indeed poised to be a year when central banks around the world shift their policy positions in tandem. If the past two years were all about tightening in the form of raising interest rates, this year may be one where banks opt to either hold rates steady or engage in rate cuts. And that could be good for risk assets.1

The Swiss National Bank kicked things off on March 21, becoming the first developed country to cut rates. To be fair, Switzerland did not experience the same level of inflation that the U.S. and other European countries did – so the Swiss decision to cut rates was perhaps not as meaningful as if the Fed or European Central Bank had done so.

Here’s One Simple Step to Help You Improve Your Long-Term Investment Goals

The recent Swiss National Bank rate cut signals a possible wider trend, underscoring the importance of proactive financial planning. Understanding your financial situation and building a strong strategy for wealth growth can help you prepare for the future.

It is for these reasons that I’ve created this special guide, Evaluating Your Net Worth2, which may help answer important financial questions like:

• How do I correctly calculate my net worth?
• How does my net worth compare to other households?
• What strategies can help me grow my net worth over time?
• What are the risks and factors that can help me grow my net worth?

If you have $500,000 or more to invest and want to understand how to measure your net worth, download our guide Measuring Your Net Worth.1 Simply click on the link below to get your copy today!

Download Zacks Guide, Measuring Your Net Worth2

The Federal Reserve and the Bank of England (BOE) both left rates steady at their most recent policy meetings, but policymakers at both banks indicated plans to cut later in 2024. The BOE’s two remaining policymakers who had previously supported more hikes changed their view at the latest meeting, and a narrow majority – but a majority nevertheless – of Fed officials reaffirmed projections of three rate cuts in 2024, with longer-term projections showing the benchmark Fed funds rate settling just under 4% by the end of 2025.

In the emerging markets space, Brazil and Mexico have also been lowering rates, with Brazil cutting rates six times since last August and Mexico making its first cut on the same day as the Swiss National Bank. These banks started their hiking cycles earlier than the developed world, and likely have more runway for cutting as the U.S. and Europe join in.

Taken together, all signs point to borrowing costs falling broadly across the world throughout 2024, which should support investment and bolster the case for risk assets. Long-time readers of my columns know that I do not subscribe to the “don’t fight the Fed” mantra, as economic fundamentals and earnings growth matter more to the direction of stocks, in my view. But easing monetary conditions certainly does not hurt, especially in a year when we’re expecting positive growth.

If we were to assume that the U.S. and foreign countries all enter a sustained path of growth with moderating interest rates and inflation, then there’s a good argument that both domestic and foreign equity markets should benefit. We tend to favor a U.S. bias because growth here is poised to be stronger, but there’s also a good case that international stocks could run nicely as well. The S&P 500 trades at a current P/E of 20.5x, compared to 13.4x for the MSCI All Country World ex-U.S.

While we may not know how the market will be affected long-term, a great start is evaluating your financial position to remain prepared. If you do not currently know your net worth, then now may be a great time to calculate it.

Our free guide, Evaluating Your Net Worth2, was designed to help you answer important financial questions, such as:

• How do I correctly calculate my net worth?
• How does my net worth compare to other households?
• What strategies can help me grow my net worth over time?
• What are the risks and factors that can help me grow my net worth?

If you have $500,000 or more to invest and want to understand how to measure your net worth, download our guide Measuring Your Net Worth.3 Simply click on the link below to get your copy today!

Disclosure

1 Wall Street Journal. March 21, 2024. https://www.wsj.com/economy/central-banking/swiss-national-bank-unexpectedly-cuts-rates-in-first-for-advanced-economy-4599528b?mod=economy_lead_story

2 ZIM may amend or rescind the “Measuring Your Net Worth” guide for any reason and at ZIM’s discretion.

3 ZIM may amend or rescind the “Measuring Your Net Worth” guide for any reason and at ZIM’s discretion.


DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The MSCI ACWI ex USA Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 24 Emerging Markets (EM) countries*. The index covers approximately 85% of the global equity opportunity set outside the US. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.
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