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

By: Dr K C Gupta, YBB Personal Finance

SENTIMENTS

AAII Bull-Bear Spread +21.5% (above average)
$NYA50R, NYSE %Above 50-dMA 52.13% (positive; sharp drop)
$SPXA50R, SP500 %Above 50-dMA 55.00% (positive; sharp drop)
Delta MSI 67.6% (positive; lagging)

ICI Fund Allocations (Cumulative)
OEFs & ETFs: Stocks 61.02%, Hybrids 4.40%, Bonds 17.85%, M-Mkt 16.72%

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 4.60%, 1-yr 4.34%; T-Notes 2-yr 4.31%, 5-yr 4.30%, 10-yr 4.43%; T-Bonds 30-yr 4.60%; (all 4.xx%; near flat yield-curve)

TIPS/Real yields 5-yr 1.91%, 10-yr 2.10%, 30-yr 2.31%; (normal upslope)

FRNs Index 4.470%

US SAVINGS I-Bonds rate from 11/1/24 – 4/30/25 is 3.11%% (vs current 4.28%); the fixed rate is 1.20%, the semiannual inflation is 0.9506%.

For current banking rates, see www.depositaccounts.com/

Stable-Value (SV) Rates, 11/1/24

TIAA Traditional Annuity (Accumulation) Rates
Restricted RC 5.25%, RA 5.00%
Flexible RCP 4.50%, SRA 4.25%, IRA-101110+ 4.50%

TSP G Fund 4.375% (previous 3.875%).

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

MARKETS

The US post-election stock rally has stalled. With the recent inflation data, the Fed may not cut as much as many expect. The US bond market is reacting negatively to high annual deficits & total debt, so the long-term rates have moved up (the Fed only controls the short-term rates directly).

The INDIAN stock market is critically at the borderline of pullback & correction with about 9-10% decline from late-September high. Rupee weakness will make the returns worse for the US investors. (Market pullback is 5-10% decline from the recent highs, correction is 10-20% decline, bear market is more than 20% decline.)

According to the SBI, Indian RUPEE may depreciate to high-80s or low-90s vs dollar (current $1 ~ Rs 84).

ECONOMY – TRUMPONOMICS 2.0

TARIFFS on friends & foes (the talk now is 10% on all, 60% on China) will have a global impact & may start new trade wars. However, as India has high tariffs/ customs for luxury imports, there may be high/ matching counter-tariffs in some areas. The new US tariffs may favor US reshoring. Overlooked in these tariff wars may be the fact that countries have different mixes in their national income – taxes (individual & corporate), custom duties/ tariffs, fees, sales of government assets, etc.

Lower US corporate TAXES will make the US businesses more competitive. Many countries with higher corporate taxes may not lower them suddenly or at all but may resort to rebates or incentives without triggering WTO disputes.

Tougher IMMIGRATION rules will hurt Indian outsourcing & IT companies. These businesses require regular flow of people for training, workflow & supervision.

ENERGY policies on US oil/gas exploration & production (E&P) may lead to lower energy prices & that would be a positive for India & the EMs. Some resolution of the Russia-Ukraine war will also be positive for global energy & supply-chains.

Trump’s pronouncements on TAIWAN, such as Taiwan must pay the US for defense, may encourage China to test the US commitment to protect Taiwan. In his previous term, Trump insisted that the NATO members must spend 2%+ of their budget on defense; this indirectly forced the NATO countries to purchase more US military equipment. India may also feel pressure to reduce dependence on Russian military equipment in favor of those from the US & Europe.

FINTECH

Indian brokerages face additional regulations by the SEBI on speculative trading, especially the derivatives (futures & options). The newer brokerages that focus on speculative futures & options trading would be most impacted. Established brokers have diversified sources of revenues, so they won’t be impacted as much.

TAXES

Several US mutual funds have declared big year end capital gain (CG) distributions. This issue is important only in taxable accounts & you may use tax loss harvesting (TLH) strategies to reduce/ eliminate the impact. You may use similar tax-efficient ETFs in future. www.morningstar.com/funds/ready-big-capital-gains-tax-bill

Steps to reduce taxes for 2024: Fully contribute to 401k/403b & IRAs; review tax withholdings & pay estimated taxes &/or withhold more from paychecks, pension checks or retirement withdrawals; use TLH; donate appreciated stocks & funds to DAF, but you must itemize; use energy credits that you may be eligible for; don’t forget the RMDs & new tricky rules for RMDs for Inherited T-IRAs. 

For more information, see https://ybbpersonalfinance.proboards.com/