Economic Outlook: Mid-Year Review and Forecast

So far 2024 has been an interesting year economically. Interest rates remain relatively high and the Federal Reserve has not indicated for certain whether or not they will indeed cut the Fed Funds rate as many as three times this year. 

The stock market, though volatile at times, is hovering at near all-time high levels for the Dow, the S&P 500 and other major indexes. Home sales remain robust, and inflation is definitely still here as well. And of course there is the huge potential economic wildcard, the 2024 election. 

Here are some thoughts as you review your portfolio and overall financial plan at mid-year. 

The Economy So Far 

As we write this, the housing market is doing very well with demand for housing seemingly not impacted by relatively high mortgage interest rates. Inflation is still with us as anyone who visits their local supermarket can attest to. 

The U.S. job market remains strong into the spring in terms of hiring, but many experts are looking for some sort of slowdown there this year. There have been a number of articles in the media cautioning new college grads that they may be facing a tougher job market than grads in recent years. 

Employment rates remain high and many people are doing well. This can help fuel the economy, whether this happens and to what extent remains to be seen. 

Key Indicators and Trends    

Inflation remains at relatively high levels. At the end of 2023, the Federal Reserve had indicated that they would be looking to implement three rate cuts of 75 basis points each. However, with inflation still on the higher side it remains unclear as to whether the Fed will follow through with any or all of these rate cuts.  

The strength in the stock market is an opportunity for investors. At some point it can pay to look at taking profits in some areas if the markets remain on their current path. At the very least reviewing your portfolio for rebalancing is critical so as not to take on more risk than is appropriate for your individual situation.  

Which companies and market sectors will benefit from the current economic situation is hard to say.  

Potential Opportunities and Risks for Investors in the Second Half of the Year  

One opportunity for investors looking to invest in fixed income or various types is that interest rates remain high on many bonds, CDs and other types of fixed income investments. This may be a good time to consider a bond or CD ladder to lock in these higher rates.  

Inflation and high interest rates both remain risks to the economy. Higher inflation can convince consumers to cut back on their spending for groceries, dining out, entertainment spending and other areas. Lower spending could hurt companies in these and other industries.  

Certainly, the presidential, senate and congressional elections this fall pose both risks and opportunities for investors. We may not know the full impact of the election until very late in the year or into 2025. 

Tips for Conducting a Mid-Year Portfolio Review 

As with any year, it is important to look at your portfolio at mid-year to see if your various holdings are performing within your expectations for each type of investment within their respective asset classes. 

Does your portfolio need to be rebalanced? Are there opportunities to harvest any tax losses in the rebalancing process to offset gains elsewhere? Are you on track with the growth of your portfolio relative to your over financial planning time horizon? 

One thing to consider regarding the fixed income portion of your portfolio is whether you are taking advantage of the current high interest rates. A bond or CD ladder can help lock in these rates while providing cash payouts at set intervals. You can decide how to best use this money when the various “rungs” on the ladder mature. 

In general, do not overreact to market or economic trends this year or any year. Focus on your long-term investment strategy and how it dovetails with your overall financial plan. You may need to adjust your investment strategy periodically, but refrain from doing this in reaction to current market events. Chasing the market is often a losing proposition for investors.  

Be sure to consult with your Wedbush financial advisor to discuss your portfolio and your financial planning to help ensure that you are on the right track towards achieving your financial goals.  

Disclosure  

Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor.  

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.  

Fixed income securities are subject to increased loss of principal during periods of rising interest rates and are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by contacting your Wedbush Financial Advisor and/or Registered Representative.