In the evolving economic landscape of 2024, the impact of inflation and robust growth has shaped market expectations, recalibrating anticipated Fed rate cuts and intensifying focus on the upcoming November election. Amidst varied economic data, including moderated inflation and mixed sectoral performance, investors are cautiously optimistic but mindful of lingering uncertainties.
Higher-than-expected inflation and strong economic growth led to early second-quarter declines in both stock and bond markets. An economy that is too strong could put upward pressure on inflation and may cause the central bank to delay rate cuts.
The upcoming November election is increasingly in the spotlight and is anticipated to remain a major focus in the months ahead. While economic perspectives often correlate with political affiliations, financial markets have demonstrated resilience across various administrations. Additionally, election years typically witness favorable stock market performance, buoyed by stimulative policies typically pursued by the incumbent party.
Stock market returns in the US were strong but remain boosted by growth stocks that continue to defy gravity.
Initial expectations for three Fed rate cuts starting in June have been scaled back to potentially just one cut for the year, supported by recent data showing subdued inflation and labor market conditions.
Initial expectations for three Fed rate cuts starting in June have been scaled back to potentially just one cut for the year, supported by recent data showing subdued inflation and labor market conditions.
The Federal Reserve has continued its cautious and data-dependent approach to monetary policy, maintaining the federal funds rate within a target range of 5.25% to 5.50%. This decision reflects ongoing concerns about inflation, which remains above the Fed’s 2% target despite signs of moderation. Key economic indicators, particularly employment and inflation metrics, will guide upcoming rate decisions. Interest rate traders are currently pricing in a 93% probability of the first rate cut happening in September (1).
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