Treasury yields have steadily climbed since the start of the year, with the 10-year Treasury yield rising back to 4.16% after reaching a low of 3.79% in late December.
Currently, consensus earnings growth is expected to be 1.3% YoY for the fourth quarter, which would mark a deceleration from 3Q (+6.1%).
The long-awaited recession never materialized in 2023 as the sectors of the economy rotated from hot (i.e., travel and leisure) to cold (i.e., housing) over the last few years.
Here are our 10 themes for 2024. Count on more than a few surprise ingredients throughout the year to spice up the financial markets.
Over the last few months, we have highlighted that the Fed should be done with its tightening cycle based on real-time, high-frequency data that suggested that economic growth and inflation were cooling.
Investors are beginning to price in a 'soft landing' as the base case over the next 12 months. This is evident across a number of indicators.
For much of 2023, the market has tried to anticipate a Fed pivot – only to be wrongfooted several times. However, sharply higher interest rates, cooling inflation pressures and moderating wages have the market convinced that the Fed’s current tightening cycle is over.
Following the surge in inflation, the most aggressive Fed tightening cycle since the 1980s and multi-decade lows in business and consumer confidence, calls for a U.S. recession have been prevalent all year.
Good news – the earnings recession is over! After three consecutive quarters of negative earnings growth, 3Q S&P 500 earnings are on pace to climb 5% YoY. If sustained, this would be the best quarter of earnings growth since 2Q22.
While 3Q23 growth showed the economy expanded at a 4.9% annualized rate, it is important to remember that the GDP report is backward-looking.
Much like Halloween, it has been a scary time for investors.
With next week’s 3Q GDP report shaping up to be a blockbuster number (the Atlanta Fed GDPNow is tracking a +5.4% growth rate), it is worthwhile to reiterate our thoughts on the economy and how we expect growth to unfold over the next year.
The recent repricing in longer-maturity yields has pushed the 10-year Treasury yield to levels not seen in 16 years.
As heightened inflation has lingered, the Federal Reserve diminished hopes of 2024 interest rate cuts and economic data suggests a mild recession in the first half of 2024.
Investors had gotten used to smooth sailing with the economy remaining resilient, the equity market soaring double digits, and volatility remaining (mostly) subdued.
Inflation has declined considerably from last year’s peak of ~9.0% to ~3.7%. However, policymakers still think they have more work to do and have signaled that one additional rate hike is likely.
Downside equity market volatility can be unsettling, but it is important to put the pullback in perspective and identify the drivers of the negative market reaction. First and foremost, the equity market was due for a modest pullback.
While our Washington Policy analyst believes there is a path to a resolution to avoid a government shutdown ahead of the looming September 30 deadline, the rhetoric out of Washington suggests otherwise.
The Energizer Bunny! That’s the term that best describes the U.S. economy.
When you step back and think about it, it is hard to believe that this hugely important retirement benefit has only been around for just over 40 years.
A steady stream of news helped drain enthusiasm from the equities markets through most of August, snapping a five-month growth streak at a time of the year known for cool market performance despite the swelter of its dog days.
While the S&P 500 delivered solid performance this summer, we remain cautious in the near term given the Index remains modestly above our year-end target of 4,400.
It’s premature to call off a recession. Lower shelter costs will ease inflationary pressures. Treasury supply dynamics caught the market by surprise.
While economic growth drives corporate earnings, remember that the S&P 500 is not a replica of the U.S. economy.
Consumer spending remains the lifeblood of the economy accounting for nearly two-thirds of economic activity.
Coming into the year, over 60% of economists expected the economy to enter a recession in 2023. But the economy’s resilience, particularly in the wake of aggressive rate hikes, has surprised the market and supported better than expected earnings growth and the equity rally year-to-date.
Raymond James CIO Larry Adam examines the reasons for the decision and what the impact may be on the financial markets.
Record-breaking heat waves dominate the news headlines, with 2023 shaping up to be one of, if not the hottest year on record. Extreme temperatures are shattering records across the U.S., Europe and in parts of Asia – not just on land, but also in the sea.
With inflation falling and growth slowly grinding lower, time is running out on many global central bank tightening cycles – especially for the Federal Reserve (Fed) that meets next week.
The Fed is executing its playbook according to plan – get interest rates up quickly, keep tightening albeit at a more moderate pace, and then hold rates steady to allow real rates to nudge higher as inflation recedes.
The tech sector was the MVP of the first half. Tech is likely to maintain All-Star status in the second half.
Following a strong start to 2023, CIO Larry Adam and his team share their outlook for the remainder of the year.
This weekend marks the official start of the Tour de France – one of the biggest cycling events in the world! Cyclists begin their journey in Bilboa, Spain and over the next 23 days will traverse through challenging terrain, covering a grueling ~2,200 miles.
This past Wednesday marked the official start of summer! The summer solstice represents the best time of year – the maximum amount of daylight coupled with warm temperatures.
The surprising resilience of the economy despite the aggressive tightening remains the Fed’s biggest challenge at this point in the cycle. Below we discuss how the Fed’s thinking will likely evolve for the remainder of the year and what it means for the markets.
While the Fed wants to retain optionality on further hikes and affirm rate cuts are not on the horizon for this year, we anticipate that slowing economic momentum and easing inflation pressures will lead to the beginning of an easing cycle in 2024.
Review the latest Weekly Headings by CIO Larry Adam.
Review the latest Weekly Headings by CIO Larry Adam. Tighter lending standards still pose a risk. The debt ceiling issue will get resolved. The earnings outlook is improving.
With regional bank volatility grabbing headlines, CIO Larry Adam looks at what this activity means for the economy and asset classes.
Key Takeaways
Though equities have proven resilient, more of the long-expected effects of the Federal Reserve’s (the Fed’s) rapid interest rate-raising policy arrived in April.
Over the next few weeks, the exciting professional hockey playoffs will determine this year’s Stanley Cup winner! The NHL’s fast-paced playoff games will be sure to keep fans on edge as momentum constantly changes as players skate to a puck that travels up to 100 mph.
Start me up! This iconic Rolling Stones song keeps racing through our minds as we glance across the investing landscape. Why? Because it feels like the drivers of this turbulent market – Federal Reserve (Fed) tightening, inflation, recession worries, geopolitical fears – will never stop.
CIO Larry Adam shares why his team's market and economic views are tracking more optimistic in light of current volatility.
In many ways, the process of filling out a bracket is like investing. It requires balancing risk and reward, while maintaining discipline.
CIO Larry Adam outlines the positive events that are outweighing negative developments and looks at dynamics to focus on in the week ahead.
Regulators' prompt response and the creation of a new lending facility should limit broader market fallout from recent bank failures, notes Chief Investment Officer Larry Adam.
