Current Market Review
At the start of 2024, we were watching three key areas: the potential softening of the Federal Reserve’s stance with anticipated rate cuts, an opportunity in quality equities and fixed income, and the inevitable nervousness of investors in a presidential election year.
We are following three key investment themes as we look forward to the 2nd-half of the year:
Theme 1: Watching the Federal Reserve
We started Q2 with the expectation that the Fed is done raising interest rates, and that we should expect potential rate cuts around the mid-year point. While inflation has stayed hot through June, recent data seems to indicate that inflation rates are cooling toward the Fed’s target of 2%.
On July 15th, Federal Reserve Chairman Jerome Powell stated that they are gaining more confidence that inflation will continue its trend downwards to 2%, and they will not necessarily wait to cut rates.
Based on these remarks, we are anticipating a preliminary rate cut sometime soon, possibly in the coming months.
Theme 2: Opportunity in quality equities & fixed income
Quality equities, notably the megacap tech “giants,” continue to blossom regardless of the uncertainty around rate hikes & the election. We are continuing to monitor these opportunities, noting the impact of AI as a potential long-term structural tailwind for the US economy.
We continue to see opportunities for high-quality fixed income in the second half of 2024 as well, particularly with the potential alignment with the Federal Reserve cutting rates.
Theme 3: Presidential election year
Recent events have heightened the anxiety and nervousness of investors leading up to the election in November.
That being said, we encourage all clients to view this election from a historical perspective: regardless of which political party that takes office, stocks have continued to go higher. History gives us a baseline for what we can anticipate.
Even in years like this one, with heavily contested, pre-election volatility, once the outcome is made clear, historically the market has stabilized itself.
The opportunity for investors during this time is to make ready any excess cash that has been sitting on the sidelines for an entry point into the market if a pullback should occur.
