Week of October 7, 2024

Dec Mullarkey, CFA , Managing Director, Investment Strategy and Asset Allocation

Post-pandemic markets have been very reactive to economic news. This is probably not a surprise, as COVID shocks created disruptions that required considerable support and time to normalize. Inflation prints, labor market dynamics and central bank decisions were and continue to be intensely scrutinized. And the market seems to continue to shift its economic outlook from soft landing to recession with high frequency.

To further confuse matters, some historically reliable measures of recession risk – such as yield curve inversion and shifts in the unemployment rate – have not scored well. However, the outlook seems to be stabilizing. Right now, the market is closely aligned with the U.S. Federal Reserve’s guidance on the pace of rate cuts through the end of next year. And the distribution of economists’ forecasts for this and next year’s GDP show no hint of a recession.

The biggest risks or uncertainties at this point are the threat of escalation in the Middle East and the closely contested U.S. Presidential election. The latter could result in materially different tax and tariff policies. While oil prices reflect some risk of disruption in the Middle East, markets seem less concerned about who occupies the White House. Markets are currently betting on a balanced government and are therefore taking comfort that it will hold the President in check.?

Sources: Bloomberg, Financial Times, 2024.

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The information may include statements which reflect expectations or forecasts of future events. Such forward-looking statements are speculative in nature and may be subject to risks, uncertainties and assumptions and actual results which could differ significantly from the statements. All opinions and commentary are subject to change without notice. SLC Management is not affiliated with, nor endorsing, any third parties mentioned within this article.

Market insights are based on individual portfolio manager opinions and market observations. These are observations only and are not intended to provide specific financial, tax, investment, insurance, legal or accounting advice and should not be relied upon and does not?constitute a specific offer to buy and/or sell securities, insurance or investment services. Investors should consult with their professional advisors before acting upon any information posted here.

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