Insightful Ideas

Financial markets have felt more fragile recently with investors concerned about the economy and the possibility that the Fed may be behind on cutting rates. While there is heightened market uncertainty, the S&P 500, Nasdaq, and Dow are still up 13%, 12%, and 6% with dividends this year. This is a reminder that while market swings are never pleasant, looking past short-term volatility is the best way for investors to stay focused on their goals. This video explains Carry Trades - an unknown strategy to the novice investor - until the Yen Carry Trade was cited as a factor in the August market sell-off.

The Sahm rule predicts the onset of recessions based on the trend in unemployment. Developed by former Federal Reserve and White House economist Claudia Sahm, it signals the onset of a recession when the three-month average unemployment rate rises 0.5 percentage points or more above its lowest point in the past year.

To paraphrase Ernest Hemingway, shifts in the stock market often occur “gradually, then suddenly.” Over the past month, the market has rotated from large cap technology stocks to small caps and other sectors. Following the latest jobs report, however, stocks experienced a sharp pullback due to concerns over the timing of Fed rate cuts, a weakening labor market, and tech earnings. Financial markets are on edge as investors adjust to a potentially changing economic landscape.

It’s a topic we’ve covered before: investing during an election year can be tough on the nerves, and 2024 promises to be no different. Politics can bring out strong emotions and biases, but investors would be wise to put these aside when making investment decisions.

As we enter the second half of the year, it’s important for long-term investors to maintain perspective on the major events that have driven markets. Despite ongoing economic uncertainty, the stock market has experienced a strong rally as investors anticipate the first Fed rate cut and the rally in artificial intelligence stocks continues.