THE MARKETS
Are we witnessing an historic event?
For an airplane or a spacecraft, a soft landing occurs when the vehicle “touches the ground in a controlled and gradual way that does not damage it,” according to The Britannica Dictionary.
For the American economy, a soft landing happens when the Federal Reserve raises interest rates to cool the economy and push inflation lower—and achieves its goal without causing a recession and significantly higher unemployment. It’s not an easy task.
“Historically, soft landings have been tough to pull off…Keeping unemployment and inflation low while at the same time having robust growth is difficult. Threading that needle has proven to be quite elusive,” reported a source cited by Aly J. Yale of The Wall Street Journal.
Solid economic growth, low unemployment, rising wages, and falling inflation have one Federal Reserve official and several economists declaring that the American economy has achieved this rare event—a soft-landing, reported Bryan Mena of CNN.
So, exactly how well is the U.S. doing?
“The extent to which America has outperformed other countries since the start of the COVID-19 pandemic is breathtaking. Its real GDP has expanded by more than 10 [percent], nearly three times as much as the euro area. Among the G20 group, which includes both rich countries and emerging markets, America is the only one where output is above pre-pandemic expectations, according to the International Monetary Fund,” reported Simon Rabinovitch of The Economist.
Last week, “with an election and Federal Reserve meeting still to come, stocks faltered under the weight of the uncertainty,” reported Teresa Rivas of Barron’s. Major U.S. stock indices finished the week lower. Uncertainty about the direction of future government spending and its possible effect on Federal Reserve policy caused some turmoil in bond markets, too, reported Paul R. LaMonica of Barron’s. Yields on longer maturities of U.S. Treasuries moved higher over the week, while yields on shorter maturities moved lower.
| Data as of 11/1/24 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
|---|---|---|---|---|---|---|
| Standard & Poor’s 500 (Domestic Stocks) | -1.4% | 20.1% | 35.2% | 7.5% | 13.3% | 11.0% |
| Dow Jones Global ex-U.S. | -0.9% | 6.4% | 20.4% | -1.5% | 3.2% | 2.6% |
| 10-year Treasury Note (Yield Only) | 4.4% | N/A | 4.8% | 1.6% | 1.7% | 2.4% |
| Gold (per ounce) | 0.5% | 32.0% | 38.2% | 15.2% | 12.7% | 8.9% |
| Bloomberg Commodity Index | -2.2% | -0.6% | -5.9% | -1.8% | 4.1% | -1.8% |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
PERCEPTION VS. REALITY.
The human brain is complex and powerful. It runs on about 20 watts of power and brains need to be recharged, just like your cell phone does, according to Northwestern Medicine.
It’s interesting to note that brains are not objective. They catalogue our experiences, beliefs, and emotions and then interpret what’s happening around us. As a result, our reality on any given day is affected by “our personal physical abilities, energy levels, feelings, social identities, and more,” reported Jill Suttie in Greater Good Magazine.
For example, studies have found that hills look steeper when people are:
- Tired.
- Wearing backpacks.
- Thinking of people they dislike.
In contrast, hills look less steep when people feel energetic or think of a supportive friend.
An August survey from the National Federation of Independent Business, a small-business advocacy group, reinforced the idea that there is a gap between economic perception and economic reality. The survey found that small business owners were quite optimistic about the financial state of their businesses, reasonably optimistic about the state of their local economies, and pessimistic about the state of the U.S. economy.
| Question | Excellent/Good | OK | Poor |
|---|---|---|---|
| The current financial state of my business is: | 70% | 25% | 5% |
| The current state of my local economy is: | 33% | 44% | 20% |
| The current state of the U.S. economy is: | 10% | 32% | 58% |
When survey participants were asked when the United States might experience another recession, 52 percent said the U.S. economy was in a recession right now. A recession is a downturn in economic activity that lasts for a significant period. Economic data show the U.S. economy, as measured by gross domestic product (the value of all goods and services produced in the U.S.), has been growing since late 2020.
The answers were interesting because most businesses—small and large—experience declines in sales and profitability when the national economy is doing poorly or in a recession. The gap in perception and reality may reflect the fact that “people are upbeat about what they see directly but pessimistic about what they glean indirectly through media (and social media),” opined Rabinovitch of The Economist.
Weekly Focus – Think About It
“A politician needs the ability to foretell what is going to happen tomorrow, next week, next month, and next year. And to have the ability afterwards to explain why it didn’t happen.”
Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC. Additional advisory services offered through Novem Group and Osaic Advisory services. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth. Please see website NovemGroup.com for specific financial professional’s affiliation. Any opinions expressed in this forum are not the opinion or view of Novem Group or Osaic Wealth and have not been reviewed for completeness or accuracy. Any comments or postings are for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, may result in a loss of principal, and are not suitable for all types of investors. Past performance does not guarantee future results. (10/24)
* These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.
Sources:
https://www.britannica.com/dictionary/soft-landing
https://www.wsj.com/buyside/personal-finance/banking/what-is-a-soft-landing Or go to:
https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_Buy%20Side%20from%20WSJ_2.pdf
https://www.cnn.com/2024/10/30/economy/us-economy-gdp-q3/index.html
https://view.e.economist.com/?qs=8c4d858fa9139d530b00b25ec40bdf65fe117f88d5729ea94d87cbf85c43f09e3c17bbd199ce5c4ec8cb2d3777e0fe59cddd9c37a482b43ccf58aee1f87c8be0cf0f07b2684ca669d23da9b81cfb7a85 Or go to:
https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_The%20Economist_Money%20Talks_4.pdf
https://www.barrons.com/articles/market-tricked-investors-election-day-bounce-7ea56c39?refsec=the-trader&mod=topics_the-trader Or go to:
https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_Barrons_The%20Market%20Tricked%20Investors_5.pdf
https://www.barrons.com/market-data?mod=BOL_TOPNAV Or go to:
https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_Barrons%20Data_6.pdf
https://www.barrons.com/articles/bond-yields-jobs-report-treasury-6f6e602e?mod=md_bond_news Or go to:
https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_Barrons_Bond%20Yields%20Fell%20After%20Jobs%20Report_7.pdf
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2024
https://www.nm.org/healthbeat/healthy-tips/11-fun-facts-about-your-brain
https://greatergood.berkeley.edu/article/item/eight_reasons_to_distrust_your_own_perceptions
https://www.sciencedirect.com/science/article/abs/pii/S002210310800070X#:~
https://strgnfibcom.blob.core.windows.net/nfibcom/Banking-Survey-2023-Part-II.pdf [Questions 20-23]
https://fred.stlouisfed.org/series/GDP#0 Or go to:
https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_FRED%20Data_13.pdf
https://www.investopedia.com/articles/economics/08/recession-affecting-business.asp#:
https://www.azquotes.com/quote/56321?ref=funny-political