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

Dr K C Gupta, YBB Personal Finance

SENTIMENTS

AAII Bull-Bear Spread +8.6% (above average)
$NYA50R, NYSE %Above 50-dMA 45.51% (negative; sharp drop)
$SPXA50R, SP500 %Above 50-dMA 49.20% (negative; sharp drop)
Delta MSI 65.8% (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 4.75-5.00%
FOMC 11/7/24+ cut (the meeting after the US elections)
FOMC 12/18/24+ cut

Treasury

T-Bills 3-mo yield 4.61%, 1-yr 4.28%; T-Notes 2-yr 4.21%, 5-yr 4.22%, 10-yr
4.37%; T-Bonds 30-yr 4.67%;
TIPS/Real yields 5-yr 1.85%, 10-yr 2.04%, 30-yr 2.25%;
FRNs Index 4.542%
US Savings I-Bonds rate from 11/1/24 – 4/30/25 is 3.11%% (vs previous 4.28%);
the fixed rate is 1.20%, the semiannual inflation is 0.9506%.

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 pending (previous 3.875%).
Due to publication lag, the data above are as of the Sunday preceding.

MARKETS

The US election uncertainty is almost over: White House – Trump, Senate – Republican, House – pending. The global markets were mostly positive on the US election news. After Fed’s jumbo cut of 50 bps on 9/18/24, the bond yields & gold prices have risen due to concerns about the US annual deficits & total debt. The bond volatility index MOVE is also high. The next FOMC meeting is on Nov 6-7 & 25 bps cut is expected. The good seasonality is from Nov 1 – Apr 30.

The number of listed US stocks is shrinking. Wilshire 5000 (W5000) now has only 3,326 stocks; it had 4,700 stocks in 1974. There are fewer IPOs as the startups remain private longer (several are unicorns), a trend favored by low interest rates & availability of private capital. And many stocks disappear due to M&A, LBOs, liquidation. Indexing is also blamed for this decline in listed stocks. Retail investors now are less interested in active equity funds that typically lag their benchmarks.

The ECB rate cuts will boost the prospects for luxury goods, construction, & autos in Europe; ETF is EZU. But there are concerns are about high energy costs & Chinese growth (Europe has high exposure to China).

EM LOCAL-CURRENCY BONDS are lagging the EM dollar-denominated bonds because of concerns about potential new US tariffs. INDIAN bonds now are (or will soon be) in several EM bond indexes (Bloomberg, JPM, FTSE).

INDIAN stocks have been volatile & remain in a pullback. Foreign investors have been selling due to uncertainties about the US elections & the Fed & are possibly shifting some funds to China as it stimulates its economy.

INDIA recently repatriated 102 metric tonnes of GOLD that was held in London, an operation that finished on Dhanteras (10/29/24) & involved transporting the weight equivalent of 20 adult elephants over thousands of miles. A similar operation for repatriating 100 metric tonnes of gold was completed in May 2024. Some of this gold was used as collateral for loans, payments & other operations during the financial crisis in 1990s when India’s foreign currency reserves were too low.

Now, India has $688 billion in foreign currency reserves (some held overseas for operational convenience). The RBI gold reserve holdings now are 855 metric tonnes (#8 globally; #1-US, #2-Germany, #3-IMF) with 40% still abroad to facilitate currency & other operations. The domestically held gold & foreign reserves are not subject to any sanctions or freezing. It is estimated that about 32x as much gold is held by Indian households.

DIPLOMACY

There is a saying to keep friends close but enemies closer. In its recent dealing with the SCO & BRICS, INDIA now seems to pursue this policy rather than the previous isolationist or no-engagement policy. It’s big brother approach to Maldives is also notable – after initial frictions following the 09/2023 election of President MUIZZU, Maldives has now changed policies because it needed India’s financial & political (re Diego Garcia) help. To be an effective global player, India has to rise above the regional spats.

IT/TECH

Semi-chips designer Nvidia/NVDA is collaborating with several INDIAN IT companies to develop local AI infrastructure & software including Hindi-AI – Infosys/INFY, Reliance Industries, Tata Consultancy, Tech Mahindra, Wipro/WIT, etc. Nvidia has 4,000 employees in 6 offices in India. Nvidia CEO Jensen HUANG told a story that the PM MODI asked him to make a presentation on AI for Modi’s entire cabinet – no other world leader has done this. NVDA will be replacing INTC in the US DJIA.

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