Displaying items by tag: fed

The S&P 500 closed above 6,400 for the first time ever, driven by a broad stock market rally following fresh inflation data. The Dow Jones Industrial Average rose nearly 500 points, the S&P 500 gained 1.1%, and the Nasdaq Composite climbed 1.4%, with both indexes ending at record highs. 

Small-cap stocks surged as well, with the Russell 2000 jumping almost 3% on renewed optimism for a September Fed rate cut. The latest Consumer Price Index report showed core inflation rising 3.1% year over year in July, while headline inflation held steady at 2.7%, slightly below expectations. 

Markets now see a 94% probability of a rate cut, helping boost risk assets across the board. In corporate news, Intel shares rose over 5% after CEO Lip-Bu Tan met with President Trump, who praised Tan’s leadership despite having called for his resignation just a week earlier.

Finsum: Keep an eye out for multiple cuts this year, and surging equities despite a sluggish economy. 

The July jobs report showed nonfarm payrolls rising by just 73,000, with major downward revisions to previous months, signaling that the U.S. economy may be slowing more sharply than expected. This has fueled recession concerns, especially as three-month average job gains dropped to just 35,000 and consumer spending, the key driver of GDP, remains tepid. 

Economists point to Trump-era tariffs and weakening labor market data as contributing factors, with some suggesting we may be on the brink of a recession, though GDP still rose 3% in Q2 due to import timing. 

Market reactions were swift: the Fed is now widely expected to cut rates in September, while stocks wavered amid political backlash and uncertain economic signals. Despite the White House expressing confidence, housing and manufacturing data continue to falter, and experts warn of potential consumer pullback. 

Finsum: While some remain optimistic about a soft landing, the outlook is increasingly clouded by high inflation, policy risk, and weakening employment trends.

Higher income returns supported strong bond market performance in 2024, with lower-quality credit outperforming amid favorable economic conditions. The 2025 outlook for fixed income remains positive, as real interest rates are expected to stay above inflation, offering attractive yields and portfolio diversification benefits. 

While monetary easing is likely to continue, it will proceed at a slower pace, and policy uncertainties—such as trade, immigration, and fiscal decisions—could introduce market volatility. 

Given these dynamics, a tactical approach to rates and credit strategies is recommended, with a preference for sectors that have lagged in spread tightening. Municipal bonds remain compelling for high earners, offering tax-equivalent yields above most taxable sectors. 

Finsum: Disciplined risk management and active security selection can help investors navigate an evolving fixed-income landscape.

American consumers are increasingly uneasy about the economy, as reflected in multiple sentiment surveys. The Conference Board’s Consumer Confidence Index fell sharply in February, marking its third consecutive decline amid rising inflation expectations. 

Small businesses and homebuilders are also voicing concerns, with uncertainty reaching record levels among independent business owners. The Federal Reserve is closely monitoring inflation expectations, as shifts in consumer sentiment could influence spending behavior and long-term price stability. 

While consumer confidence doesn’t always predict spending, a new Wells Fargo survey suggests many Americans, particularly younger generations, plan to cut back due to economic uncertainty. 

Finsum: Rising costs for essentials like dining out, fuel, and entertainment are prompting noticeable changes in financial habits and part of weakening sentiment.

Donald Trump has promised to accelerate U.S. economic growth, but the economy already surged through 2024, likely ending the year with a 3% annualized GDP gain in the fourth quarter, according to the Atlanta Fed’s GDPNow. If accurate, annual growth for 2024 would range from 2.4% to 2.7%, a rate comparable to pre-pandemic levels but unexpected in the post-pandemic era. 

This surprising strength is credited to two main drivers: an expanding population fueled by increased immigration and a notable boost in productivity, partially attributed to advancements in technology like AI. Yet, challenges remain, including persistent inflation, elevated interest rates that have slowed home and vehicle sales, and a weaker hiring environment despite low unemployment. 

Businesses are optimistic about Trump’s plans to cut taxes, streamline regulations, and reduce energy costs, though his proposals for higher tariffs and mass deportations raise fears of higher material and labor costs. 

Finsum: The outlook is upbeat, with early indicators of 2025 showing confidence, underscoring the nation’s resurgence as a global economic leader.