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

By: Dr K C Gupta

SENTIMENTS

AAII Bull-Bear Spread -9.5% (below average)
$NYA50R, NYSE %Above 50-dMA 50.72% (positive, barely)
$SPXA50R, SP500 %Above 50-dMA 50.60% (positive, barely)
Delta MSI 50.9% (positive, barely)

ICI Fund Allocations (Cumulative)
OEFs & ETFs: Stocks 60.54%, Hybrids 4.24%, Bonds 17.58%, M-Mkt 17.64%

INTEREST RATES

CME FedWatch
Cycle peak 5.25-5.50%
Current 4.25-4.50%
FOMC 3/19/25+ hold
FOMC 5/7/25+ cut

Treasury

T-Bills 3-mo yield 4.35%, 1-yr 4.25%; T-Notes 2-yr 4.29%, 5-yr 4.34%, 10-yr 4.49%; T-Bonds 30-yr 4.69%;
TIPS/Real yields 5-yr 1.75%, 10-yr 2.07%, 30-yr 2.35%
FRNs Index 4.266%
US Savings I-Bonds, Rate from 5/1/24 – 10/31/24 is 4.28%; the fixed rate is 1.30%, the semiannual inflation is 1.48%.
For current banking rates, see www.depositaccounts.com/

Stable-Value (SV) Rates, 2/1/25
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 4.625 (previous 4.625%).

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

MARKETS

The chaotic news coming out of Washington DC has caused volatility in the US stock market, the dollar & the Indian stock market (the EMs in general). There are lot of things in flux – US budget, tariffs, dollar, immigration, etc. The technical picture of the Indian stock market is weak (below 50-dMA & 200-dMA; a death-cross).

IT/TECH

Indian IT R&D is low. Lot of Indian IT businesses are back-office services & support or derivatives of the foreign IT innovations – e.g. local language versions of AI ChatGPT, etc. Some are asking where is India’s AI response to the US ChatGPT, Claude, Llama, Gemini, Perplexity (Cofounder & CEO Aravind Srinivas), or the Chinese DeepSeek?
There is BharatGPT with multi-language capabilities, & Volkaithat is culturally-correct for India, etc, but those are niche products & not competitive with major global generative AI products. Indian IT firms may also tweak DeepSeek, an opensource software with significantly lower computing resource requirements, for Indian needs, but a concern may be about hidden Chinese traps & backdoors.

ECONOMY

The new Indian BUDGET has lower income taxes for the middle class, reductions in high tariffs & pro-growth initiatives, i.e. fiscal easing overall. The reductions in tariffs should provide good discussion points for PM MODI’s meeting with President TRUMP in Washington, DC (expected on 2/13/25). Modi is coming to the US after attending the “AI Action Summit” in Paris.Under the new Governor MALHOTRA, the RBI (central bank) has cut rate by 25 bps to 6.25% after a long hold since early-2023; 2-3 more cuts are expected. So, there is dual easing (fiscal & monetary) that should provide a boost the economy that had a slower growth recently. These moves should also counter Government’s efforts to reduce the budget deficit & possible adverse impacts of any new US tariffs.

Indian RUPEE continues to weaken. $1 was Rs 83.29 in late-09/2024, & now it’s Rs 87.79 for a large decline of -6.26% in just 4+ months.
The USAID operations in India are in education, health & social welfare, etc, often through the local NGOs (nongovernmental organizations). The FY 2024 budget was $140 million. Reduction or discontinuation of this aid would have an impact in those areas, but not critically so, & may have to be covered domestically.

German VW imports almost all of the auto parts, pays very low tariffs on them, & assembles VW cars in India. The initial thought may have been that VW will gradually start producing some parts in India, but it never did. VW cites pre-Modi era deals with the Government. But the Modi Government now looks at it as a tax dodge & has assessed VW high tariffs that apply to finished products.

The foreign investors are watching this VW drama in the Indian courts. VW has only a small market share in India, but there would be a lot of negative news if VW simply withdraws from the Indian auto market. It would have been better to settle this with negotiations & a new deal.
S Korean Kia has a similar tax issue on imported part classifications as VW, but at a much smaller scale. In other news, US Ford is re-evaluating return to India in view of potential new US tariffs.

SPECIAL TOPICS

US DEPORTATION flights to India have started. Large US military transport planes are being used for deportation of Indian nationals who are undocumented (but apparently verified by the Indian Embassy or Consulates) or overstayed their US visas. Almost 18,000+ people have been identified so far.

For more information, seehttps://ybbpersonalfinance.proboards.com/