Zacks Investment Management

In this week’s Steady Investor, we look at the biggest news stories and key factors that we believe are currently impacting the market such as:

• Rise in the U.S. Treasury Bond Yield
• U.S. households thinning
• China cuts interest rates

The 10-Year U.S. Treasury Bond Yield Keeps Rising – Yields on 10-year U.S. Treasury bonds have steadily climbed past 4.2%, placing them at levels not seen since 2008. Yields on long-term bonds tend to reflect investors’ expectations for where Fed-determined short-duration interest rates will end up. Recently, 10-year bond yields appear to reflect that the Fed may be done raising rates but also that rate cuts do not appear likely any time soon. In other words, rising yields on the 10-year U.S. Treasury are arguably tied to solid economic data on growth and jobs (which lowers the risk of recession and therefore rate cuts) and also downward trending inflation (which lowers the likelihood of more hikes). Recently released minutes from the Fed’s July meeting indicate that some officials are reluctant to raise rates too much further, if at all. There are a few notable implications of higher rates. One possible implication is that risk assets like stocks lose some appeal, as the risk-free rate climbs towards the long-term expected return of equities. Another implication is higher borrowing costs for households, notably in the mortgage market. The average rate on a 30-year fixed mortgage has climbed past 6.9%, up from 5% just a year ago and less than 3% in the months following the Covid-19 pandemic. With some expecting the Fed to keep rates higher for longer, there’s not a clear sign that mortgage rates will fall significantly any time soon.¹

8 of the Biggest Financial Mistakes You Should Avoid

Many investors, especially those who are planning for retirement, may often question what to do with their investments when the market takes a turn.

While there are many unknowns, there are eight common mistakes that many investors make when planning for retirement.

We are offering our exclusive guide, 8 Retirement Mistakes to Avoid, to give you more insight into these mistakes so your retirement can potentially be the ‘golden period’ you always wanted to enjoy.

If you have $500,000 or more to invest and want to learn more, click on the link below to get your free copy:

Learn About the 8 Retirement Mistakes to Avoid!²

U.S. Household Savings are Thinning Out – Fiscal stimulus packages in the wake of the pandemic flooded U.S. households with excess savings, to the tune of $2.1 trillion. According to the Federal Reserve, some $1.9 trillion of these excess savings have been spent. The implication is that Americans now have just $190 billion in excess savings left, which some estimate will be drawn down to zero by the end of Q3 2023. To be clear, this drawdown does not mean Americans will no longer have net positive savings – it means that pandemic-era stimulus savings are gone.³

Household Savings (% change from a year ago)

A big reason for dwindling savings is, of course, U.S. consumers maintaining a healthy appetite for spending. In July, Americans increased retail spending by 0.7% month-over-month, which marked an acceleration from June’s month-over-month print and also indicates that Americans are spending at a faster pace than inflation.

China Cuts Interest Rates to Shore Up Ailing Economy – China’s economic struggles have finally prompted monetary policy action. The People’s Bank of China (PBOC) lowered a key loan facility interest rate from 2.65% to 2.5%, while also injecting $55.2 billion of new loan capital into the banking system. The PBOC also cut the 7-day interest rate on reverse repo options by 10 basis points, both actions of which should ultimately result in slightly lower borrowing costs for households and small businesses. The moves came after a batch of weak economic data which showed weak consumer spending, decelerating growth in factory output, and a property sector mired with falling investment and major developers on the verge of bankruptcy. Retail sales were seen growing by 2.5% year-over-year in July, compared to 3.1% in June; industrial production grew by 3.7% year-over-year down from 4.4% in June; investment in buildings, machinery, and other fixed assets rose 3.4% in the first 7 months of 2023 compared to a 3.8% pace set the previous year; and finally, property investment fell by -8.5% and new construction plummeted by 24.5%. All told, China’s economic recovery from pandemic lockdowns has not mirrored the experience in the U.S., and increased trade tensions between the U.S. and China have seen U.S. imports of Chinese goods fall to their lowest levels in 20 years.5

Avoid These Common Mistakes When Planning for Retirement – No one can predict or control the future of the market – but when you’re a long-term investor, it’s easy to fall prey to common investing mistakes.

In our exclusive guide, 8 Retirement Mistakes to Avoid⁶, we provide our thoughts on what we believe are 8 of the biggest retirement mistakes investors should avoid. This guide will also dive into common mistakes, such as:

• Is Your Portfolio Too Conservative?

• Trying to Time Markets

• Lack of Diversification

• Not Knowing How to Adjust Lifestyle After Retirement

• Switching Strategies Too Often

If you have $500,000 or more to invest and want to learn more, click on the link below:

Disclosure