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November 2024 - When Things are Not What They Appear
Autumn is always a period of change, but the fall of 2024, for a variety of reasons, appears to have a bit more change than normal. Not only did the U.S. have a major election, but the Fed began cutting interest rates and economic signals have been mixed. A wide variety of economic and market data are being delivered, some of which are not what they seem to be. We delve into some of these areas which are currently confounding economists and market participants alike.
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October 2024 - Boring Bonds
In the world of investing, the traditional balanced portfolio is designed with two primary components: equity and fixed income. In a purely theoretical world, the rationale of having those components is to reduce risk to some degree. Fixed income, which for these purposes will also be referred to as bonds, are generally the boring part of the equation. When there are market-generating headlines, the equity markets generally receive the attention because equity market volatility is typically more prone to larger swings. Bonds should be boring. Investors want bonds to be boring. However, the last four years have proven this is not always the case.
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September 2024 - Typical Situation in Atypical Times
Markets have a way of always seeming exasperating to investors for at least portions of the year. Even in strong years, periodic bouts of volatility are common, almost a certainty. The remainder of 2024 brings with it the potential for disruption from interest rate changes, presidential elections, economic pivots and much more as we have written about in recent Market Perspective notes. Market gyrations and the circumstances (or often the “excuses”) as to why markets go up and down may differ slightly, but thus far, 2024 has been a typical year, admittedly with a seemingly unusual set of circumstances (i.e., inflation, Fed Cycle potentially changing, political elections, etc.). For the astute observer, the title is a reference to the song by the Dave Matthews Band “Typical Situation” which in part references the daily grind through life.
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August 2024 - End of the Fed Hike Cycle in Sight?
The dog days of summer are upon us. The running commentary in August each year is that market trading slows as vacations are in full effect. Growth fears have emerged recently, and markets have experienced increasing volatility in recent weeks. This leaves economists and market participants to ponder what may lie ahead. At the top of their lengthy list of items to focus on today are interest rates. As inflation settles back towards more normalized levels, the Fed has begun a reevaluation of the rate path. While nothing is pre-determined, monetary policy may be about to shift from a year’s long hike cycle to the beginning of interest rate cuts. Lower interest rates provide liquidity for economic activity and vice versa. With these factors in mind, we analyze the current state of interest rates, and as stated earlier, what may lie ahead.
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July 2024 - Yet Another Most Important Election in History
July brings with it several significant events certain to captivate the global audience. The Summer Olympics in Paris begins on July 26, promising to feature a mix of new and established athletic stars on our screens. An even more widely watched global event (which may surprise U.S. residents), the Tour de France (TdF), is currently underway. This grueling three-week race is estimated to attract nearly 3.5 billion viewers worldwide. Global interest will soon shift to an even more challenging event: the 2024 U.S. Presidential election cycle. The Republican National Convention confirmed Donald Trump as the candidate. Recent developments of President Joe Biden’s decision to drop out of the race will cause the Democratic Party to reconsider nominees. The election path is also being reshaped by the July 13 assassination attempt of former President Trump. These conventions and the path that follows may be even more important for this election cycle.
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June 2024 - Summer Simmer
The summer of 2024 has arrived, bringing with it beaches, swimming, golf, and time with family and friends - all while enjoying the warmer temperatures. For many in the U.S., it feels like we’ve skipped straight from “it’s too cold” to “it's way too hot.” Investors today have been and continue to be primarily focused on inflation and interest rates. Simmering beneath the surface, market structure, (like the seasons), is inherently complex, unpredictable and subject to rapid change. It's true that the Fed, interest rates and inflation have defined the post-Covid recovery period. However, there are many factors which drive stock prices and some less discussed topics that are influencing markets overall. Some of these factors can often dominate headlines, while others go almost unnoticed, yet still drive economic forces and markets. Below we highlight a few such factors which have become forces worthy of discussion.
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May 2024 - The Dynamic World of Residential Real Estate
Throughout time, shelter has been seen as one of the most fundamental human needs. According to the Smithsonian Institute, the earliest known human shelters were created almost 400,000 years ago of simple materials. Over time, shelters have evolved and today owning a home has become a key milestone in pursuit of the so-called “American Dream.” This strategy of real estate ownership has also been seen as methodology for building wealth over time. Since the Great Financial Crisis (GFC) of 2008, home equity values have more than doubled, rising from $20.8 trillion to $44 trillion more recently (Source: Federal Reserve). There are many reasons for this growth, such as a low cost of capital (i.e., low interest rates) and a mismatch of supply and demand, among other reasons.
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Inflation Matters
March Madness, the cultural phenomenon surrounding the NCAA college basketball tournaments (both men and women), has come and gone once again, with the typical surprises, storylines, thrilling games and ultimately crowning a champion (congrats to the men's champion, UCONN, and women's champion South Carolina. What makes March Madness so compelling is the unpredictability and excitement, where any team, regardless of its seeding or regular-season performance, can rise to the occasion and pull off stunning upsets. The tournaments can serve as a metaphor for the outlook of the economy and financial markets.