Personal finance insights: Market sentiments, investment strategies & economic trends
By: YBB Personal Finance
SENTIMENTS
AAII Bull-Bear Spread +27.9% (high)
$NYA50R, NYSE %Above 50-dMA 73.66% (overbought)
$SPXA50R, SP500 %Above 50-dMA 79.80% (overbought)
Delta MSI 70.4% (overbought, barely)
ICI Fund Allocations (Cumulative)
OEFs & ETFs: Stocks 60.84%, Hybrids 4.50%, Bonds 17.84%, M-Mkt 16.82%
INTEREST RATES
CME FedWatch
Cycle peak 5.25-5.50%
FOMC 9/18/24+ cut
FOMC 11/7/24+ cut
Treasury
T-Bills 3-mo yield 5.25%, 1-yr 4.36%; T-Notes 2-yr 3.90%, 5-yr 3.65%, 10-yr 3.81%; T-Bonds 30-yr 4.10%
TIPS/Real yields 5-yr 1.64%, 10-yr 1.68%, 30-yr 1.97%
FRNs Index 5.120%
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 https://www.depositaccounts.com/
Stable-Value (SV) Rates, 8/1/24
TIAA Traditional Annuity (Accumulation) Rates
Restricted RC 5.50%, RA 5.25%
Flexible RCP 4.75%, SRA 4.50%, Newer IRAs 4.75%
TSP G Fund 4.125% (previous 4.500%).
Due to publication lag, the data above are as of the Sunday preceding.
MARKETS
GLOBAL RALLY since late-October, 2023 resumed after 1-day selloff of 8/5/24. In the chart nearby from 10/28/23, shown are the ETFs VTI (US), VGK (Europe), VPL (Pacific), EEM (EMs), INDA (India). The returns shown from 10/28/23 are in dollars; the data would be different in local currencies. In general, the US investors with overseas exposure get hurt when dollar is strong & benefit from dollar weakness. There are several geopolitical issues that may cause global market hiccups. In the US, the SP500 fwd P/E is
22 (high); the annual budget deficit & total debt are high & growing (see below).
At the highly anticipated speech at the Fed’s Jackson Hole Conference, Fed Chair Powell emphasized anchoring & monitoring of market EXPECTATIONS. A common measure of inflation-expectations is based on real/TIPS yield & it equals nominal Treasury yields minus real/TIPS yields; FRED has data on it. An indication of traders’ fed fund rate-expectations is by the CME FedWatch that is based on futures quotes around the future FOMC meetings. Readers will note the related information in the data panel above.
Jeff Currie of Carlyle says that COMMODITIES are entering a new capex-driven Supercycle. Lower rates will benefit interest-sensitive commodity groups (energy, industrial metals, precious metals). Think broadly about higher production of batteries & natural gas. Higher demand would be from improving global economies & continuing government stimulus. Gold & other storable commodities will benefit from geopolitics & the move by many countries away from dollar reserves. Deglobalization & tariffs are also positive for commodities. Many investors have prematurely soured on conventional energy, but it would be around for years to meet the current & growing demand.
ECONOMY
The interest on $35 trillion total US DEBT now exceeds the US defense budget. If it doubles in 10 years, as expected, the interest will be comparable to Medicare expenses. The US debt/GDP will exceed 106% by 2028 & that would be the 1st time since 1946 just after the end of WW II. The annual US budget DEFICITS look to be around 7% of the US GDP as far as eyes can see – very unusual for peace times. The 2017 TCJA will expire in 2025, so taxes will go up; some aspects of TCJA may be extended.
RETIREMENT
It’s a BAD idea to withdraw funds from retirement accounts to pay for children’s EDUCATION (& the Democratic VP candidate Tim WALTZ did just that!). The IRAs do allow penalty-free withdrawals for qualified educational expenses, but 401k/403b don’t. Roth IRAs also allow penalty-free withdrawals of contributions for any purpose. But those should be a last resort option. It’s better to plan ahead for children’s education with 529s, UTMAs, etc; the SECURE 2.0 also allows rolling some excess funds from 529s into beneficiaries’ Roth IRAs. Keep in mind that you may borrow money for children’s education but may not be able to do so for retirement.
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