Economy & Markets

The path of interest rates has been highly uncertain over the past few years due to inflation, economic growth, and the Fed. The 10-year U.S. Treasury yield, for instance, jumped from 3.8% at the end of last year to a high of 4.7% in April, before settling around 4.2% more recently.

Investors and the financial media tend to focus on macroeconomic concerns such as inflation, labor markets, and the Fed. While these topics are important, history shows that the economy and markets grow over long periods of time due to technological innovation and gains in productivity.

The Dow Jones Industrial Average reached 40,000 for the first time recently as markets continue to rebound from a 5% decline earlier this year.

With markets nervous about stubborn inflation, a gradually slowing labor market, and the timing of the first Fed rate cut, investors are more focused on this corporate earnings season than usual. This is because while the economy has avoided a “hard landing” corporate earnings only began to rebound in the second half of 2023.

The stock market has become increasingly jittery with the S&P 500 experiencing its first 5% pullback of the year. The possibility the Fed could delay its first rate cut, declines in technology and artificial intelligence stocks, and tensions in the Middle East have all contributed to the market swoon.

With major stock market indices hovering around all-time highs, some investors continue to worry about the state of the economy. While trends around inflation and jobs have been positive, putting the Fed in a position to cut rates later this year, there are still many concerns in areas such as real estate.

Markets continue to be driven by artificial intelligence stocks and the timing of the Fed's first rate cut. Beyond the day-to-day swings, these drivers reflect important trends in innovation, productivity, and the health of the economy.

With the presidential election season heating up, there will no doubt be a flurry of daily headlines between now and election day on November 5.

Consumer spending is the backbone of the U.S. economy, constituting over two-thirds of our nearly $28 trillion GDP. When consumers spend money on everyday goods and services, and make large one-time purchases, it not only helps to spur economic growth but is also a reflection of economic trends.

When it comes to markets, day-to-day price swings are often more about what investors expect than the underlying facts. This is because markets are designed to anticipate future events and assign them a price today.

The author Fyodor Dostoevsky once wrote that “man only likes to count his troubles; he doesn’t calculate his happiness.” The idea that the glass is always half empty perfectly captures how many investors feel about the economy and financial markets, especially over the past few years.

Stock and bond markets struggled during the first trading week of 2024 as investors questioned the probability of a "soft landing" and what it may mean for the timing and size of Fed rate cuts later this year.