{"id":12959,"date":"2024-01-22T16:03:37","date_gmt":"2024-01-22T16:03:37","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12959"},"modified":"2024-01-22T16:03:37","modified_gmt":"2024-01-22T16:03:37","slug":"strong-holiday-shopping-season-trillions-available-to-equity-markets-china-woes","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/strong-holiday-shopping-season-trillions-available-to-equity-markets-china-woes\/","title":{"rendered":"Strong Holiday Shopping Season, Trillions Available To Equity Markets, China Woes"},"content":{"rendered":"\n

In this week’s Steady Investor, we explore current market news that we believe investors should keep on their radar, such as:<\/p>\n\n\n\n

\u2022 Consumers starting 2024 off strong
\u2022 The $8.8 trillion available to equity markets
\u2022 China\u2019s economic growth<\/p>\n\n\n\n

Another Strong Showing from U.S. Consumers<\/strong> \u2013 Some economists and analysts were worried that paltry consumer spending data in October was a sign that U.S. consumers were running out of steam heading into the holiday shopping season. They weren\u2019t. The Commerce Department reported that U.S. retail sales rose by a seasonally-adjusted 0.6% month-over-month in December, which followed an also strong 0.3% uptick in November. It appears that consumers put a pause on spending in October in anticipation of coming out with greater force in the holiday months (see chart below).1<\/sup><\/p>\n\n\n\n

Download Our User-Friendly Guide to Tax Planning in 2024<\/a><\/span><\/strong><\/p>\n\n\n\n

While tax planning might not be the most thrilling topic, it’s a crucial component of your financial strategy.<\/p>\n\n\n\n

Our free guide, Tax Planning in 2024: A User-Friendly Guide2<\/sup><\/a><\/span><\/em><\/strong>, aims to simplify the complexities of tax laws, empowering individuals and business owners to make strategic decisions that minimize tax liability. It also covers a range of key tax issues, such as:<\/p>\n\n\n\n

\u2022 Investments\u2014including tax loss harvesting, loss carryover, investment interest expense deductions, and many more topics.
\u2022 Healthcare and Education\u2014from the Child Tax Credit to Health Savings Accounts to 529 plans and more.
\u2022 Retirement Planning\u2014Traditional and Roth IRAs, catch-up contributions, Required Minimum Distributions and other essential topics.
\u2022 Charitable Giving & Estate Planning\u2014Gifting strategies, Donor-Advised Funds, private foundations and other ways to help yourself as you help others.<\/p>\n\n\n\n

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

Download Tax Planning in 2024: A User-Friendly Guide2<\/sup><\/em><\/a><\/span><\/strong><\/p>\n\n\n\n

\"\"
Census3<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n

On a year-over-year basis, retail sales rose 5.6% in December, which was virtually in line with last year\u2019s 5.8% December consumer spending data and was about 200 basis points higher than inflation. When consumer spending rises faster than inflation, it\u2019s a clear signal that \u2018real\u2019 spending in the economy is rising, a strong growth indicator and a likely sign that the U.S. economy expanded again in the fourth quarter.<\/p>\n\n\n\n

The $8.8 Trillion Available to Rotate into Equity Markets<\/strong> \u2013 Rising interest rates in 2023 resulted in short-term downside volatility in equity markets, and also raised borrowing costs for families, businesses, and investment property owners. The other side of higher rates\u2014for savers\u2014was a much better story. Banks offered higher deposit rates in lockstep, and yields on ultralow risk instruments like certificates and money markets shot from basically 0% up to the 5% range. This surge in risk-free yields attractive trillions of new dollars into money-market funds and other cash-like instruments, such that by the end of Q3 2023 there was nearly $9 trillion parked in cash (see chart below).4<\/sup><\/kbd><\/p>\n\n\n\n

Money Market Funds Attracted Trillions of New Dollars in a Rising Rate Environment<\/em><\/strong><\/p>\n\n\n\n

\"\"
Source: Federal Reserve Bank of St. Louis5<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n

So, what happens in an environment when interest rates are expected to come down, considering the Federal Reserve\u2019s projections for 75 basis points of rate cuts in 2024? And also considering an economy that\u2019s expected to downshift, which could ease pressure on the long end of the yield curve? Investors are hoping that falling rates might encourage some of the ~$9 trillion in money market funds \u2018off the sidelines,\u2019 rotating into equity markets which have historically outperformed bonds and cash, especially in the year following rate cuts.<\/em><\/p>\n\n\n\n

China\u2019s Economic Growth\u2014and Outlook\u2014Continue to Falter<\/strong> \u2013 The Chinese economy had a rough 2023. According to the National Bureau of Statistics, China\u2019s GDP expanded by 5.2% in the fourth quarter and also by 5.2% for the year, which marks the slowest growth for the world\u2019s second-largest economy since 1990 (when excluding the pandemic shutdown). China\u2019s ailing property sector has been a key source of the economic drag, but consumer spending has also anchored growth over the past year. The youth unemployment rate remains astonishingly high, over 20% at last print, and has been such a sticking point for the government that they stopped publishing the data altogether. Consumers are increasingly lacking confidence about their economic prospects\u2014and are also feeling negative about sagging property prices\u2014that they\u2019ve been saving more than spending. It follows that China is experiencing deflationary pressures while the rest of the world grapples with inflation, with consumer prices falling for the third straight month in December. These factors described above are all short-term problems for the Chinese economy, but there\u2019s also a glaring issue China is confronting long-term: demographics. Births fell by more than 500,000 last year to just over 9 million, continuing a trend where the number of newborns is in freefall. For the first time since the early 1960s, China\u2019s population shrank in 2022, a problem for a country that\u2019s seeking to expand its economic prowess in the future. An aging population, a declining workforce, and strict immigration policies all factor as severe headwinds to economic growth.6<\/sup><\/p>\n\n\n\n

Tax Planning in 2024<\/strong> \u2013 Don’t let tax planning be a headache this year!<\/p>\n\n\n\n

Our user-friendly guide, Tax Planning in 20247<\/sup><\/a><\/span><\/em><\/strong>, provides an overview of the many issues involved in tax planning, including ways you can reduce your tax burden. This guide is by no means exhaustive, but offers a solid resource you can use to have more effective discussions with your family and tax advisors. It covers:<\/p>\n\n\n\n

\u2022 Investments\u2014including tax loss harvesting, loss carryover, investment interest expense deductions, and many more topics.
\u2022 Healthcare and Education\u2014from the Child Tax Credit to Health Savings Accounts to 529 plans and more.
\u2022 Retirement Planning\u2014Traditional and Roth IRAs, catch-up contributions, Required Minimum Distributions and other essential topics.
\u2022 Charitable Giving & Estate Planning\u2014Gifting strategies, Donor-Advised Funds, private foundations and other ways to help yourself as you help others.<\/p>\n\n\n\n

If you have $500,000 or more to invest and want to learn more, click on the link below:<\/p>\n","protected":false},"excerpt":{"rendered":"

Holiday numbers resolve worries that consumer spending was sputtering, equity markets look to lure trillions parked on sidelines, China economy continues to falter.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-12959","post","type-post","status-publish","format-standard","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12959","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12959"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12959\/revisions"}],"predecessor-version":[{"id":12963,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12959\/revisions\/12963"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12959"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12959"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12959"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}