Home Stretch of 2024. Less than 7 weeks until we usher in 2025!
The major US stock market indexes are enjoying double digit gains:
- Dow 15.35%
- S & P 500 22.74%
- Nasdaq 24.37%
- Russell 2000 13.35%
The major international stock market index averages are trailing the US:
- MSCI EAFE 2.85%
- MSCI Emerg. Mkt. 6.58%
Bond yields have remained range bound most of 2024, however the 10-year US Treasury ended last week with a yield of 4.445%. I’ve been suggesting 4.25 to 4.5% may be the norm going forward.
Last week’s CPI report did little to convince investors inflation is headed much lower, as the headline number increased by .2% for the month. The core, which excludes food and energy, increased by 3%. Both increases were the same as the month prior.
I have been thinking the intermediate term inflation rate may not be 2%, the Federal Reserve’s current target. 3 to 3.5% is my current opinion of the intermediate term inflation rate. To get to, and remain at 2%, I believe the economy will have to slow rather significantly. Of course I want to be incorrect in my current assessment. I would like to see GDP around 2.5% to 3.5% with a tame rate of inflation.
Expectations
The S&P 500 currently sports a forward Price to Earnings Ratio (PE) of over 22, high by any measure. Typically, when the PE is this high, returns going forward are muted, as it is more challenging for companies to continue to grow their profits.
I have done my best so far, not to mention politics. President-elect Trump’s policies may be both stimulative and contracting.
If the current tax environment is extended beyond 2025, and Trump can lessen the tax burden for tips, Social Security, the Corporate Tax rate and more, consumers will have additional money to spend. Appears to be good for the economy?
The incoming administrations’ desire is to have US citizens purchase more goods from US manufacturers than international manufacturers. Adding costs to goods being imported will increase international prices.
Many people ask why tariffs? Several countries, the US exports, place a tariff on our exported goods to their citizens. This is a way to protect their domestic manufacturers, apparently.
I’ve read China may be able to sell an Electric Vehicle for $15,000. What would that do to the US automobile manufacturers if they had to compete with that type of pricing?
I am not suggesting tariffs are positive or negative. It is very challenging to take a definitive stand. Most economists believe tariffs are negative, however most economists tend to be incorrect, other than their assessment of what is already in the rear-view mirror.
It is far too early to speculate about the economic impact of the upcoming Trump presidency. Most of the rhetoric and opinions I have been reading, have continued to be partisan. Shocking!
For the time being, it is a little wait and see.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
