🦉 This Week in the Markets

A 4-Minute Recap

Author

Al Atencio
August 30, 2024 • Estimated Reading Time: 4 minutes

Catch-up with the markets in 4 minutes.

I’m reading and scrolling, and bringing you the best, so you don’t have to.

End of Week Markets Update

1) Federal Reserve Chair Jerome Powell signaled last week that “The time has come” for the Fed to start cutting interest rates.

What does this mean?

  • If the Fed slowly cuts rates with an economic soft-landing or no landing playing out (no recession) then this should be very positive for both equities and fixed income.

  • If the Fed ultimately ends up cutting rates aggressively into a developing recession then that won’t be so good.

So, for those wanting rates to come down quickly - be careful, what you wish for.

2) Since the 2008-2009 financial crisis, the prevailing wisdom was that financial markets had soared thanks to a Fed cocktail of ZIRP (zero interest rate policy) and QE (quantitative easing).

It seemed like easy money was the main fuel keeping the bull market alive.

So when the Fed started hiking rates in 2022, everybody believed the party was over.

Fast forward just two years. We've weathered one of the most aggressive rate hike cycles in decades and a two year bear market. And where are we now?

Surprise! Markets are touching all-time highs.

3) The S&P500 isnot the only major index at all-time high.

So when you read that the current rally is only being driven by NVIDIA and tech stocks - that’s WRONG.

Tech is leading the bull market, without a doubt, but the rest of the market is following.

4) Berkshire Hathaway is closing in on a trillion dollar value.

Both classes of shares are comfortably beating the S&P500’s return of ~18-19%, this year.

Grandpa Buffet’s still got it.

5) As we see, there are expectations for the bull market to continue powering higher. But maybe those expectations are too high?

Charts

You don’t see such positive broad participation across world markets in a bear market or recession:

With inflation having come down significantly over the last year and a half, Fed interest rates are now significantly above inflation at the moment.

And finally, some parting wisdom:

…Our inherent psychology militates against the buy-and-hold investor. As events shake the world markets, the strategy of “doing nothing” seems counterintuitive, if not downright irresponsible. Yet data have shown that attempting to “time” the market is a fool’s errand, and the buy-and-hold approach is the best strategy.

Jeremy Seigel - Stocks For the Long Run

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