Entering the second half of 2024, the US economy continues to defy traditional indicators, as the longest-ever yield curve inversion persists. Contrary to historical patterns, the inverted yield curve has not led to a recession but has instead fueled stronger economic growth. This unexpected resilience has allowed investors to enjoy higher yields from short-term investments, such as Treasury bills and money market funds.
The housing market remains in a unique situation, with higher interest rates dampening buyer activity while the limited availability of single-family units keeps home prices elevated. Despite these challenges, the US economy has experienced a soft landing, defying expectations of a downturn.
Financial markets have been buoyed by strong earnings, driving year-to-date equity returns. While mega-cap growth stocks continue to dominate the market, there are indications that gains may broaden across the equity spectrum, fueled in part by investor excitement over the potential of artificial intelligence (AI) technology.
As the 2024 presidential election approaches, market volatility is expected to increase during the campaign months before easing closer to Election Day. Fixed-income markets have seen higher yields, attracting income-oriented investors who have poured over $1.5 trillion into money market funds since the Federal Reserve’s rate-hiking campaign began.
However, investors are cautioned against complacency, as the cash-friendly environment may not endure. While the Fed may not take immediate action to reduce short-term rates, there is an opportunity to lock in higher yields by adding longer-duration bonds to investment portfolios.
Navigating the complexities of the current economic and market conditions requires a wealth management partner who understands the dynamics. George Foldesy, a portfolio manager with Commerce Trust in Tulsa, emphasizes the importance of finding such a partner to stay focused on long-term financial goals.