Yogi Bera, Niels Bohr and We Agree
We agree with the late, great Yogi Berra and famed physicist, Niels Bohr – “It’s difficult to make predictions, especially about the future.”
From Fed decisions to economic trends to election outcomes, 2024 is a year which challenges anyone to weigh in with a prediction for the balance of this year. We are wise to stay with what we know and not stray too far into speculation of what that might mean.
Let’s start with the Fed
On Friday the PCE (the Fed’s favorite indicator of inflation) came in at 2.8% as expected. Since “in line” with expectations is as good as beating expectations, markets were up that day. So, no surprises here. Despite a new Hawkish Federal Reserve member coming on from Cleveland, she is replacing Loretta Mester who is also was a bit of a hawk. Again, no immediate change to the “wait and see” makeup of the Federal Reserve voting members. Holding rates where they are for a while longer, but pricing in one or two rate cuts (as expressed in several member speeches) is what markets expect.
The economy remains on a growth trend.
While slower than last year, the GDP revision from earlier this month remains positive at +1.3% ( Bloomberg 5-30-24). Again, this is in line with expectations, so no significant market moves. We see a solid economy maintaining itself within a slowly slowing trend – what the Fed has been trying to engineer. To support this picture we saw no change to the Jobless Claims number out last week. Employers are cautiously holding on to workers. With inflation receding and the labor force remaining (mostly) employed, economic growth may still slow, but growth is expected to remain in a positive range. Equity market expectations for earnings have been largely realized this quarter further adding to the expectation that market growth may slow from last year but will remain positive as companies earnings “grow” into their valuations.
A quick word about the election and its impact on your portfolio – it’s too soon to begin to speculate on both the outcome and the market impact. We have three branches of government, and any new configuration will alter what changes to our current economic trend might suggest. Real policy changes and economic effects of those changes are not likely to be felt in any sustained way until we are into 2025.
To get a closer look at the analysis of these trends register for our Quarterly Market Outlook Zoom scheduled for July 12th. Sign up for our newsletter to receive the invitation to register. In the meantime, call us with any questions or concerns, and have safe and enjoyable summer celebrations!
June 1, 2024 / Linda P. Erickson, CFP
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with or without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.
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