Personal finance insights: Market sentiments, investment strategies & economic trends

By: Dr K C Gupta, YBB Personal Finance

SENTIMENTS

AAII Bull-Bear Spread +11.6% (above average)
$NYA50R, NYSE %Above 50-dMA 50.76% (positive, barely)
$SPXA50R, SP500 %Above 50-dMA 47.60% (negative)
Delta MSI 60.2%% (positive, lagging)

ICI Fund Allocations (Cumulative)
OEFs & ETFs: Stocks 61.62%, Hybrids 4.36%, Bonds 17.84%, M-Mkt 17.17%

INTEREST RATES

CME FedWatch
Cycle peak 5.25-5.50%
Current 4.50-4.75%
FOMC 12/18/24+ cut
FOMC 1/29/25+ hold

Treasury

T-Bills 3-mo yield 4.34%, 1-yr 4.24%; T-Notes 2-yr 4.25%, 5-yr 4.25%, 10-yr 4.40%; T-Bonds 30-yr 4.61%; (all 4.xx%; near flat yield-curve)
TIPS/Real yields 5-yr 1.85%, 10-yr 2.07%, 30-yr 2.33%; (normal upslope)
FRNs Index 4.347%
US Savings I-Bonds rate from 11/1/24 – 4/30/25 is 3.11%%; the fixed rate is 1.20%, the semiannual inflation is 0.9506%.
For current banking rates, see www.depositaccounts.com/

Stable-Value (SV) Rates, 12/1/24
TIAA Traditional Annuity (Accumulation) Rates
Restricted RC 5.50%, RA 5.25%
Flexible RCP 4.75%, SRA 4.50%, IRA-101110+ 4.75%

TSP G Fund 4.250% (previous 4.375%).

Due to publication lag, the data above are as of the Sunday preceding.

MARKETS

The US stock market is expected to do well through the yearend & into 2025. The good seasonality is from November 1 to April 30; it’s a weak effect that doesn’t always work, but it is likely to work this time.

Among the emerging markets (EMs), India has been an exception – it has done well & it’s quite expensive. But the EMs overall have been cheap for years & they need market specific catalysts. China & India dominate the EM indexes.
The EM middle class is growing, but due to lagging infrastructure developments, adoption of technologies such as wireless communications, online banking, e-commerce, drone applications, etc is rapid. The US tariffs will impact the EMs differently. Some EMs are moving production to lower-cost EMs, or to the US or Europe to escape tariffs.

ECONOMY

The new RBI Governor is Sanjay Malhotra (26th; 2024-27). His backgrounds are in computer science (IIT/K), public policy (Princeton) & finance (IAS, GoI). Look for some new digital initiatives at RBI under Malhotra. Renowned Chicago Economist Dr Raghuram Rajan was the 23rd Governor, 2013-16.
The former Governor Shaktikanta Das (25th; 2018-21-24) completed his 2nd 3-yr term. Some had expected a rare 3rd term for Das, but December RBI rate hold (at 6.5%; bank reserves were reduced by 50 bps to 4.50%) just ahead of the potential renewal date meant that was unlikely. Malhotra RBI may cut rates in February, if not earlier.

Russia-Ukraine war may have a negotiated settlement & India may have some role in facilitating that. Russian oil that was diverted from Europe to Asia may return to Europe; as a result, China & India may lose access to lot of cheap oil. However, there will be beneficial improvements in global supply-chains. A construction boom in Ukraine would follow.
That may be a reason for the new Reliance (Ambani) – Rosneft 10-year deal to lockup supply of around 500,000 barrels/day of Russian crude oil. Benchmark will be Dubai oil prices with small spreads. Reliance will pay in rubles. The deal may be renewed for another 10 years. Refined oil products will be exported globally.

Switzerland revoked India’s MFN (most favored nation) status citing lack of reciprocity after an adverse court ruling by the Supremes on Nestle. Supremes held that MFN clauses aren’t automatic, but the Income Tax Department must also rule on them (strange).

Now that Nippon Steel bid to buy US Steel is likely dead, Japan will be looking for acquisitions or joint-ventures elsewhere to try to become #2 global steel producer, possibly in India, Indonesia, or Vietnam. Indian steel imports are high (including from China) & India would be wise to allow new steel production by an India-Japan joint-venture even if it may mean losing #2 place to Japan. (Global steel production rank now: #1-China, #2-India, #3-Japan, #4-US).

FUNDS

India closed-end funds (CEFs) have been around for decades (MS IIF 1994- , Abrdn IFN 1994- ). The CEFs have fixed number of shares. Their assets can grow only from IPOs, secondaries, pre-approved shelf-registrations & consolidations (M&A). Premiums or discounts may develop depending on their demand. Distributions may include return of capital (ROC); some have managed distribution policies (IFN). 
Many CEFs use leverage (but IIF is unleveraged & IFN has negligible leverage) & their ERs tend to be high because the costs of leverage are included in the ERs. They are quite volatile & are generally riskier than ETFs  & mutual funds (OEFs; limited availability). India ETFs were discussed in several recent articles (2024: 07/05, 08/16, 09/13, 09/27, 10/10).

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