Economic Surprises, Business Investment, Bitcoin
November 1, 2024 | FIRESIDE CHARTS
Hello Readers,
A little over a month ago, the Federal Reserve kicked off the current monetary easing cycle, cutting the Federal Funds rate by 50 basis points (0.50%). Since then, the 10-year Treasury yield has risen more than in any other easing cycle over the past 35 years. Historically, it’s quite common for the 10-year yield to rise in the month following a Fed rate cut but this time may be different because, unlike in past cycles, the Fed isn’t waiting for recession signals before easing.
Watch the quick video for more on this and keep reading below the video to see other market and economic updates from the week.
Thank you for being here,
Denis Rezendes, Portfolio Manager
Fireside Charts
Recent economic data has been stronger than expected, sending intermediate and long-term interest rates higher. Gross Domestic Product (GDP) growth in the third quarter remained strong, driven by consumer spending. Business spending remains a consistent positive contributor as well, driven in part by government incentives. S&P 500 companies are reporting better than expected earnings, thanks to continued margin expansion. Bitcoin is back near an all-time high. Job openings. Housing prices. Forever young.
1. Economic softening in the second and third quarters contributed to the Federal Reserve’s decision to cut the Federal Funds rate by 50 basis points:
Source: The Daily Shot 10/31/2024
2. Stronger economic data, along with the assurance that the Fed won’t snuff out the current expansion, has sent the 10-year treasury rate higher:
Source: @biancoresearch
3. The U.S. consumer remains undefeated:
Source: The Daily Shot 10/31/2024
4. Services spending has outpaced goods spending in recent years, but both contributed equally to growth in the recent quarter:
Source: The Daily Shot 10/31/2024
5. The Inflation Reduction Act and the CHIPs Act clearly boosted business investment in 2022 and 2023, and it has remained consistently positive since:
Source: The Daily Shot 10/31/2024
6. The U.S. needs leading edge semiconductor manufacturing domestically but that does not come cheap:
Source: @technology Read full article
7. More companies are beating on earnings than sales:
Source: @KevRGordon Read full article
8. There are now three certainties in life—death, taxes, and S&P 500 margin expansion:
Source: Deutsche Bank Research
9. The current closing high, set back in March, is just over $73,000:
10. Inflows into EFTs, and other related vehicles, are pushing the price higher:
Source: Deutsche Bank Research
11. Job openings are approaching pre-pandemic levels:
Source: The Daily Shot 10/30/2024
12. The entrepreneurial spirit remains alive and well as very small companies continue to hire, in contrast to medium and large companies, many of which over-hired in past years:
13. Housing prices have remained surprisingly resilient, despite higher rates:
Source: The Daily Shot 10/30/2024
14. The U.S. is expected to have a better demographic profile than many of its peer countries:
Source: The Economist Read full article
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The federal funds rate is the interest rate at which banks lend money to each other overnight. A treasury yield is the interest rate the U.S. government pays on its debt, and the annual return that investors can expect from holding a U.S. government security.
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The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. across various industries. The 10-Year U.S. Treasury is a debt security issued by the U.S. government with a maturity of ten years from its issue date. It serves as a benchmark for long-term interest rates, reflecting investor expectations on economic conditions, inflation, and Federal Reserve policy.