On Air with Altair: 1Q 2024 Market Review Video
Want to hear Altair’s analysis of the markets, but lack the time to read all of Altair Insight? Watch our video summary of the report or listen to the podcast episode and get caught up on our market review in 3 minutes.
ECONOMY IS UNSTOPPABLE
The good news for investors is that the global and U.S. economies are healthy despite challenges from high interest rates and geopolitical threats. The world economy has gained some momentum this year, with the U.S. leading the way. Leading economic indicators in the U.S. have turned positive, the job market is healthy, consumer spending is brisk, and manufacturing is recovering. Federal stimulus money from infrastructure and investment programs approved earlier this decade has begun to flow more freely. That provides an important tailwind for the economy.
FED’S PAUSE IS RISKY BUT WISE
With a strong economy, the Federal Reserve remains on course to pull off the first soft landing – pushing inflation down without a recession – in 30 years. But the task will be tougher now that it has postponed the planned interest-rate cuts in order to stay tough on inflation. The Fed signaled a delay on rate cuts after inflation reports ran hotter than expected for three straight months. We believe that the stall in inflation’s downward trend will be temporary. Fed policymakers are taking a calculated risk that keeping rates at their highest in 23 years will not take a steeper toll. But backing off prematurely in the inflation fight would pose an even bigger risk.
MARKETS
The decision to hold off on rate cuts has made for a tough time in the markets lately. U.S. large-cap stocks had their best first quarter since 2019, lifted by initial expectations that the Fed would cut rates six or seven times this year. Market estimates have since fallen to just two cuts in 2024. That has caused a pullback in higher risk assets as yields rose to match the market’s rate pessimism. We find it encouraging that the market has enjoyed broadened support this year beyond just tech stocks and those tied to artificial intelligence. We think this balance will help the market in the months ahead.
OUR OUTLOOK
Markets could move sideways in the near term until we get more visibility about inflation and rate cuts. A sound economy and substantial fiscal stimulus, however, provide a strong underpinning in the meantime. Markets should benefit as rate cuts get nearer.
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