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Over-Exuberant Positioning for a December Rally
Last week we processed robust economic data and growing clarity on Federal Reserve policy, instilling a consensus view for a strong market that is now well reflected in positioning.
When Will the “Bill” Come Due?
A couple of weeks ago, we wrote about how the deficit had come back into focus for the U.S. financial markets.
Opportunities in Biotechnology Will Follow Advancements in the Science
The WisdomTree BioRevolution Fund (WDNA) is showing signs of recovery, reflecting renewed investor confidence in biotechnology innovation.
Economic Resilience Continues to Impact Rate Outlook
This week’s data and market momentum solidified the case for a resilient U.S. economy, defying concerns of an imminent slowdown. Initial jobless claims dropped to a five-month low, reinforcing the strength of the labor market, while GDP growth projections hover around an impressive 2.5%.
Japan Needs M&A to Change the Vibe
To judge by the action in some foreign markets, Donald Trump’s election is pricing in economic winter.
Economic Strength Drives Jump in Long-Term Rates
Last week showcased the complexities driving markets and the economy, with inflation data, Federal Reserve commentary, and political developments at the forefront. While inflation metrics in the CPI came in as expected, the PPI surprised on the higher side, pushing up estimates for the Fed's preferred PCE inflation gauge.
How to Approach Today’s New Rate Regime
The macroeconomic overview presents ambiguity. In the face of U.S. elections, falling rates, and a host of trends that could shape the market, investors need to find a smart approach.
Fed Flexibility, GOP Sweep Boost Market Outlook
Last week’s developments mark one of the most pivotal weeks in recent memory.
Fed Watch: Speed Limit 25
Following the September FOMC meeting’s much ballyhooed 50-basis point (bps) rate cut, the voting members scaled back and reduced the Fed Funds by 25 bps this time around.
A Closer Look at the Budget Deficit
While the primary focus for the financial markets has been on the continued resilient U.S. economy and what the current Fed rate cut cycle will ultimately look like, there has been another topic that has been making the rounds in the bond arena: the budget deficit.
Jobs Report Signals Another Fed Cut This Week
Last week's jobs report hit a "sweet spot" for the markets, confirming enough economic cooling to signal potential Fed rate cuts without yet sparking fears of a recession. I expect a 25-basis-point cut from the Fed this week and Powell may set us up for a data-dependent pause in December.
2024 Economic & Market Outlook: The Final Stretch
Here we are, another calendar quarter down with one more to go in 2024, and investors have yet to see a “hard landing” emerge.
Resilience Persists Amid Rate, Election Uncertainty
This week’s economic indicators continue to reflect a resilient U.S. economy despite the ongoing pressure from higher interest rates. Jobless claims dropped to 227,000, indicating a steady labor market. Durable goods orders came in strong, aligning with estimates, and GDP growth for Q3 is expected to come in between 3% and 3.25%, a robust figure by most standards.
The Race to Fiscal and Monetary Stimulus
The U.S. election outcome is anyone’s guess, so let’s try to game out the winners and losers from the candidates’ major policy proposals.
Strong Retail Sales and Rising Yields Signal Resilience
The latest economic data reveals a resilient economy, led by strong retail sales and a surprising drop in jobless claims. Despite some weakness in manufacturing, industrial production, and housing, overall economic strength is reflected in the projected third-quarter real GDP growth, expected to come in at a robust 3%—largely driven by productivity gains. This productivity led rebound is very positive and this confirms that despite tighter monetary conditions, the real economy remains strong.
Stock Surge Defies Mixed Economic Data
This past week saw a notable surge in the stock market, pushing it to all-time highs, despite mixed economic data. Inflation figures, jobless claims, and sentiment reports have been uneven, but markets remain resilient, with the VIX hovering around 20—a sign that fear persists among investors.
Some Best Practices for Trading ETFs: Seeking to Maximize Your Investment Efficiency
Exchange-traded funds (ETFs) have grown in popularity as one of the most flexible and accessible investment vehicles available today. Offering a blend of stock-like liquidity and mutual fund-like diversification, ETFs can serve as a core component in the portfolios of both novice and experienced investors
It’s the Economy…
The Fed’s “recalibration” of monetary policy is more than just about shifting to rate cuts. It also involves where the policy maker is now placing its greater emphasis on setting the course for easing in the future. Rather than inflation being the primary driver in the decision-making process, labor market activity has now taken center stage, and with that, one could argue, for the Fed, it’s now about the economy.
Rising Productivity Shows Economy Remains Resilient
The jobs report closed last week with robust read outs of an official number that beat economist expectations. Below the surface, however, hours worked fell to levels often associated with recessions. This juxtaposition of more workers clocking fewer hours suggests that while employment figures are up, the quantity of work didn’t expand much.
Navigating High-Yield Bonds: Opportunities, Risks and Fallen Angels
Over the past several years, high-yield bonds have delivered impressive returns, outperforming most other sectors of the fixed income market.
Money Supply Growth Eases Hard Landing Fears
The M2 money supply growth rate in the U.S. accelerated, marking the first time the monthly change exceeded a 5% annualized rate after several months of more moderate increases. A 5% money supply growth is a desirable target, as it reflects 2-3% growth in the economy with 2% inflation. Thus, the uptick in money growth is reassuring and supports the possibility that we will avert a hard landing for the economy.
The Appeal of Agency Mortgage-Backed Securities in a Shifting Economic Landscape
While agency mortgage-backed securities offer compelling valuations, not every mortgage is created equally.
Just Like That, Japan Is Rallying Again
In the span of a few days in late July, the market got live to two contrasting theories at once: that U.S. inflation is collapsing while Japanese inflation will remain stubbornly high.
Fed's Big Rate Cut Sparks Recalibration
I was pleasantly surprised by the Federal Reserve (Fed) decision to begin the easing cycle with a 50-basis point (bp) cut as the real economic data came in relatively stronger than expected.
The advisor’s guide to customizable portfolios
Join the thought leaders at WisdomTree for an overview of their Portfolio Solutions platform and how advisors leverage WisdomTree’s investment expertise.
Understanding the Potential Effects of Tax Policy on Corporate Earnings
Corporate tax rate policy is a routine hot-button issue during every presidential election cycle, and this year’s campaign is no different.
Fed Watch: “Cut” to the Chase
After much anticipation, the Fed finally delivered a rate cut at the September FOMC meeting. The amount had been the subject of a great deal of speculation of late, and the voting members decided on a half-point reduction to kick off this easing cycle, bringing the new Fed Funds trading range down to 4.75%–5%.
Market Strength as Rate Cuts Loom
The markets closed quite strong last week and were approaching all-time highs again for the S&P 500. The most recent Presidential debate shifted the odds markets, as Harris became a 55-45 favorite on the betting site PredictIt and a very slight favorite on Polymarket. It is positive for the risk markets which did not pull back with Harris gaining strength.
The Fed’s “Balancing” Act
Post-Jackson Hole and now post-jobs report, the markets can settle in for a rate cut at next week’s FOMC meeting.
The Case for Bold Fed Rate Cuts
Last week’s big day in the markets and for the economy was on Friday. I characterized the jobs report as being weakish—not disastrous but certainly not strong. The payroll report came in a bit short of expectations with weak lowered revisions to past reports, and although the unemployment rate adjustment was expected, the U-6 unemployment rate, a broader measure of labor underutilization, continued to rise indicating underlying weakness in the job market.
Inflation Now Taking a Back Seat
With Labor Day now in the rearview mirror, the money and bond markets will no doubt become laser focused on the September FOMC meeting. Yes, Fed Chair Powell telegraphed that a rate cut is forthcoming, but he also emphasized how monetary policy is still data dependent.
A Careful Recalibration Needed
This week’s data reflects the resilience of the U.S. economy. Currently, the economy is holding steady with jobless claims in the 230,000 range and recent inflation data showing stability. Friday’s inflation report was essentially at expectations and indicates that the Federal Reserve (Fed) will make a rate cut of at least 25 basis points (bps) at the September meeting. Whether the cut is 25 or 50 will depend mostly on this week’s employment report.
Navigating Earnings Season: Tailwinds of Tomorrow
With his Jackson Hole speech, Federal Reserve Chair Jerome Powell all but promised rate cuts were coming. That’s cool. But it is why that matters.
There’s Another New Carry Trade in Town
Is the Japanese yen carry trade back on? Tough question. We think it is, now that the Bank of Japan has toned down its hawkish rhetoric. More on that later. Still, even if we are wrong, the reality is that the market will be talking about the violent ructions of August 2024 for the rest of our careers.
Powell Did Well at Jackson Hole
Powell’s remarks in Jackson Hole were more dovish than I anticipated. Powell did not hedge; the clear direction of policy was lowering rates. The focus of the Federal Reserve’s (Fed's) narrative was shifting away from inflation risk to employment.
Where Are the AI Revenues? A Look at Mega-Cap Tech Sales Multiples
Since the release of ChatGPT, mega-cap technology companies poised to profit from AI-enhanced software tools or cloud AI-model training capabilities have seen a surge in their stock prices. Yet, many have yet to realize significant AI-driven revenue growth, let alone a substantial impact on their bottom lines.
Anticipation for Powell’s Jackson Hole Speech
I have received a lot of blowback from my recommendation that the Federal Reserve (Fed) drop the Fed Runds Rate by 150 basis points (bps) over the next several weeks. Certainly, the data has come in stronger than I (and many others) have anticipated. Particularly surprising was the drop in jobless claims, now nearer to the midpoint of my 200k to 240k range after breaching the upper limit.
The Treasury Rally Ticket Needs to Be Validated
The recent U.S. Treasury yield rally is compared to a similar rally in Q4 2023, driven by expectations of a shift in Federal Reserve policy.
Cutting Rates Without the Fed
The financial markets appear to be rather confident the Fed will finally begin its rate cutting process at the September Federal Open Market Committee meeting, at a minimum. The debate has now shifted as to what this easing cycle will ultimately look like.
Calm Markets Amid Fed Uncertainty
Last Monday morning, I tried to shake up the conversation about how far behind the curve the Federal Reserve (Fed) is currently by suggesting an inter-meeting 75 basis points (bps) cut and another 75 bps cut in September.
It's Time for the Fed to Cut Permalink
Never before in my history studying the Federal Reserve (Fed) has the Fed’s policy come into question immediately following the Fed decision.
Fed Watch: This May Be the Last Time
Once again, the Fed kept rates unchanged at the July FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25%–5.50% band that was introduced exactly a year ago and still resides at a more than 20-year high watermark.
Navigating Earnings Season: From Pricing With Margin
Coming into this earnings season, one of the most intriguing questions was how well the consumer-facing companies would be able to maintain their pricing power. The new algorithm for success is a bit more complicated than “raise prices by x.”
Indications of Easing Inflationary Pressures
The economic data is coming in very good for markets. Starting with GDP, we observed a modest growth rate of around 2% in the first half of the year. While not spectacular, it’s far from recessionary conditions. This level of growth, with slight inventory accumulation, suggests a stable economic backdrop.
Looking Back at Equity Factors in Q2 2024 With WisdomTree
The second quarter began with inflation concerns causing a negative return in April, but improved inflation led to a more hopeful market in May and June, with AI and semiconductor stocks leading.
Don’t Fight the Tape. The Market Is on Small Caps.
The big story making the rounds this summer is the spike in the small-cap Russell 2000 since the release of the latest Consumer Price Index (CPI) report, which shocked the market by printing 0.0% month-over-month in June.
Bitcoin Halving and Mining Update: Mid-2024 Perspective
The bitcoin halving event in April 2024 reduced the block reward for miners, which is expected to increase bitcoin’s price.
Politics, Economy, and Tech Impacting Sentiment
This week's commentary reflects a mixture of political, economic, and technical challenges facing investors. Let’s begin with the political landscape which continues to heavily influence sentiment.
Navigating Earnings Season: The Death of Price over Volume
Welcome to the second installment of our new blog series, “Navigating Earnings Season,” where I examine the world of earnings reports from major companies — giants like JP Morgan and Pepsi, as well as niche players in various sectors.
Dominating Factors Determining the Course
The assassination attempt against former President Trump gave a bump to his odds of becoming president, as they rose from 60% to 67% on Monday morning on Predictit.org.
2024 Economic & Market Outlook: Half-Time Report
Heading into the second half of 2024, it appears the markets are no longer focusing on the odds for a recession.
Navigating Earnings Season: The Coming Outlooks
Welcome to our new weekly blog series, “Navigating the Earnings Season.” In this series, I dive into the world of earnings reports from major companies, spanning giants like JP Morgan and Pepsi, as well as niche players in various sectors.
When Will the Yield Curve “Un”Invert?
The UST yield curve has been inverted, but there is speculation about when it will “un-invert" and move out of negative territory.
Will the Fed Cut Rates before Reaching 2% Inflation?
The outlook for the Federal Reserve (Fed) through the first six months of 2024 has been a bit of a roller-coaster ride to say the least. While one could argue the overarching premise has been for rate cuts, it has certainly not been a smooth ride.
Time for a Rate Cut?
The employment report from last Friday, in my view, was weak. Although the headline number came in slightly above expectations, the composition was troublesome, with more than 110k jobs subtracted from the last two months and private sector jobs lagging.
Market Reacts to Presidential Debate
The presidential debate was the big story of the week and revealed a mild market preference for former President Trump. Notably, during the 90 minutes of the debate when there was no other market news, S&P 500 Futures rose 10 points, due to Trump’s business-friendly policies despite his higher-policy unpredictability.
Staking a “Claim” With Inverted Curves
Remember when an inverted yield curve used to predict recessions? Here we are about two years removed from the Treasury yield curve moving into negative territory, and the U.S. economy has yet to move into recession territory. The economy’s resilience has certainly been a surprisingly welcome development and has left many a market participant wondering what happened.
Fed Policy Implications Amid Seasonal Trends
Recent economic data slightly underperformed expectations, though nothing dramatically concerning. Jobless claims dipped just below the 240K level, which is something to watch closely. Claims above this threshold have historically been indicative of labor market weakness, which could influence Federal Reserve (Fed) policies.
Consumer Staples Need a Weak Jobs Market
Is the labor market okay? Depends on who you ask. The answer to that question should be a strong guidepost for whether you like Consumer Staples relative to the broad market.
Mixed Economic Signals: Inflation Down, Claims Up
Last week’s inflation data was very encouraging, with key indices like the Consumer Price Index and the Producer Price Index coming in below expectations. Stay up to date with the latest commentary from Professor Siegel.
The Costco Economy
The shift in consumer behavior toward buying more discretionary items is attributed to the deceleration of inflation, according to Costco management.
The Prices Don’t Feel Right: Unraveling the Inflation Perception
Inflation is not fun. And—for the past 30 years—it has largely been a non-issue for consumers. That dynamic has changed. The relevant question is whether this is something persistent and meaningful or simply a fleeting feeling.
Fed Watch: At the Midway Point
Once again, the Fed kept rates unchanged at the June FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25%–5.50% band that was introduced in July last year, and still resides at a more than 20-year high-water mark.
Why India Remains Our Favorite Emerging Markets Growth Story Post-Election
India’s equity markets have experienced strong growth and momentum, with rising incomes and political stability contributing to the country’s potential for accelerated growth.
Case for Currency Hedging: Weak Currency Benefits Europe and Japan
In today’s complex global economy, currency fluctuations play a crucial role in shaping investment outcomes. While we’ve previously emphasized the importance of currency hedging in a U.S. investor’s international portfolio, there’s a subtle aspect that often goes unnoticed: the positive impact of weak currencies for Japanese and European companies and U.S. tolerance of it as a check on Chinese exports.
A Cushion Against Potential Economic Turbulence
There was a significant reaction in the bond market to the latest job growth figures, which exceeded expectations. The positive surprise led to a sharp 10 basis point rise in long bond yields. Interestingly, equity markets remained resilient in the face of this increase, suggesting a collective market relief that we are not heading toward a slowdown or recession.
The Dollar Remains King
The most important precondition for the U.S. dollar to lose its dominance would be the existence of a viable alternative currency, which currently does not exist.
Deflated Expectations
Here we are through the first five months of 2024, and you could say the more things change, the more they stay the same. What exactly do we mean, you might ask?
Awaiting a Crucial Employment Report
The story that captured all media attention last week was Donald Trump’s guilty verdict. But the Trump conviction had no effect on the markets or predicted probabilities in betting markets for him becoming president.
U.S. Credit: We’re Not in Uncharted Territory
While the money and bond markets continue their Fed-watch saga, there is one constant that we have been emphasizing for the fixed income landscape: a new rate regime.
Navigating Inflation: The FOMC’s Single Mandate
The Federal Open Market Committee is always data-dependent. But the dependency is not always the same. There are times when inflation matters more than the labor market, and times when the situation is reversed. Every regime is unique. There is never a perfect corollary to a previous experience. This time is not different.
Asian Stock Markets Have Become Anti-Correlated
The consensus has egg on its face with respect to Chinese stocks. It wasn’t supposed to be this way. Entering this year, one of the big concerns—and the primary reason for China’s ugly multi-year bear market—was the country’s destiny with a “4-handle” on gross domestic product (GDP) growth.
Navigating Economic Signals with Optimism
Despite the overall positive response from the markets last week, the data presented its share of ups and downs. Stay up to date on the varied indicators with the latest commentary from Professor Siegel.
A Pivotal Week for the Markets
Last week was quiet on the economic and data front. The one high frequency data indicator we did receive was jobless claims, which ticked up after a dull stretch of near constancy. The jobless claims figure came in at 231,000, which is at the higher end of my preferred range of 200-240k.
No Stag, Sticky Flation
It seems that every few years, the term “stagflation” gets floated around to describe the current and/or prospective U.S. macro landscape.
How to Approach the Shifting Rate Environment
Join the thought leaders at WisdomTree to learn all about strategies catered to meet this market moment.
A Slow but Steady Path
The markets rightly experienced a significant relief last week. Stay up to date on last week’s Fed meeting with the latest commentary from Professor Siegel.
Fed Watch: Push It Back, Push It Back, Way Back
Once again, the Fed kept rates unchanged at the May FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25% to 5.50% band introduced in July 2023 and still resides at a more than 20-year high-water mark.
Google’s Dividend Debut Sparks Buzz
Attention-grabbing performances from the likes of Microsoft, Google, and Tesla swayed market sentiments back to growth.
Inflation: The Last Mile Could Be the Hardest
I have never come anywhere close to running a marathon of any sort. I am told the last mile could be the most difficult part of the endeavor.
Is It Time to Back Away from Big Tech?
The economy, inflation, interest rates and market valuations drive the key questions facing advisors. Does the tech stock landscape mirror the boom of 1996 or the bust of 2000? What will be the impact of Meta's inaugural dividend payment? Is now the time to increase allocations to international Markets? What are the challenges faced by retail banks by not providing competitive rates and the resulting opportunity cost of holding cash? Finally, we will address the complexities advisors face in investment management, client growth, and retention.
2024 Economic & Market Outlook
As 2023 draws to a close, what will 2024 have in store for investors? It appears this Fed rate hike cycle is over and now we pivot to potential rate cuts. But not until inflation has sufficiently cooled. As we've seen before, a lot can happen in the meantime.
Our 2024 Economic & Market Outlook covers:
- Is the recession of 2023 coming in 2024?
- What the “new rate regime” means for portfolios and strategic asset allocations
- Trends and opportunities in Fixed Income and Equities
The Global Edge: What Will “Higher for Longer” Actually Mean?
As major central banks in developed economies gear up for the next phase of monetary policy, the key question on the minds of global investors is what lies ahead. A consensus among central bankers suggests that rates will continue to stay in restrictive territory, with no cuts on the horizon in the near term. Given this backdrop, the central question for the coming year is deciphering the implications of "higher for longer." This shift in monetary policy will undoubtedly have far-reaching consequences for investment strategies, requiring careful assessment and adaptation as the financial landscape evolves.
Mid-Year Outlook for Stocks, Bonds and the Economy
Join VettaFi and WisdomTree's thought leaders for a discussion on those and other critical issues, and help advisors respond to client questions and concerns about their wealth.
U.S. Mid-Caps Remain Attractive After July’s Rally
July offered investors a slight reprieve from the market volatility that has characterized the first half of 2022.
Be Greedy when Others Are Fearful
Let’s talk about something few people have any interest in talking about this year.
Opportunities in Asset-Backed Fixed Income
On the latest episode of the Behind the Markets podcast, we had a fascinating conversation with Don Kohn, former Federal Reserve vice chair, and Dave Goodson, Head of Securitized Fixed Income and Senior Portfolio Manager at Voya Investment Management.
Yen Weakness May Support Japan Equities
Can a weakening yen (JPY) continue to bolster Japanese equity markets?
The Nearly Unlimited Demand for Better Energy Storage
At this point, where do we honestly see ourselves on the journey to more and better energy storage solutions?
Looking for Recession Clues in All the Wrong Places?
How quickly the narrative has shifted back and forth in the money and bond markets.
A Realistic Framing of the Progress in Artificial Intelligence
Let’s face it—we love exciting announcements. Why talk about the small technical improvements of a given artificial intelligence (AI) system when you can prognosticate about the coming advent of artificial general intelligence (AGI)? However, focusing too much on AGI risks missing many incremental improvements in the space along the way.
Mid-Cap and Small-Cap Dividends Shine amid Volatility
In our third of three posts on small-cap valuations, let’s examine how focusing on dividend payers amid a volatile market backdrop has provided excess returns, with even lower valuations.
The Current and Future State of Model Portfolios
This article is relevant to financial professionals who are considering offering model portfolios to their clients.
Digital Asset Market Note: A “De-pegging” Soros Would Be Proud Of
This week has seen a series of rapid contractions across the digital asset ecosystem. In a space that is well-known for volatility, even this week has stood out to observers.
A Strategy for Volatile Markets in 2022
Investors often look for ways to enhance income, lower a portfolio’s overall expected volatility or even help manage taxable gains.
The WisdomTree Q2 2022 Asset Class and Risk Factor Review and Outlook
Regular readers of WisdomTree blogs know that we are firm believers in both asset class and risk factor diversification when building our Model Portfolios.
The WisdomTree Q2 2022 Economic and Market Outlook in 10 Charts or Less
When reviewing the current state of the global economy and investment markets, we recommend focusing on market signals and weeding out market noise.
Will the Future Be Web3, Metaverse or Open Source?
“Web3” has emerged as a buzzword over the last few months.
What Lies around the Corner for Digital Assets?
Digital assets have grown exponentially in the past decade. After the recent crypto sell-off, Benjamin Dean discusses what may lie ahead in the digital assets ecosystem.
The WisdomTree Q1 2022 Economic and Market Outlook in 10 Charts or Less
When reviewing the current state of the global economy and investment markets, we recommend focusing on market signals and weeding out market noise.
The New Year Reset: The WisdomTree U.S. Value Fund
One of WisdomTree’s flagship value Funds made some notable changes at the start of the new year.
2022 Economic & Market Outlook
2021 has been a year of notable economic growth after unexpected change caused by the COVID-19 pandemic. In our Economic and Market Outlook for 2022, we lay out some of the “known unknowns” we believe could significantly affect the investing landscape...
China and India Energy: Two Countries for the Same Tale?
For India and China, 2021 is a tale of two equity markets. But when it comes to energy—particularly coal-generated electricity—the two countries are remarkably similar. Liqian Ren discusses the potential impact of this reliance on India and China’s economic growth.
Checking In on Risk Factor Diversification
This article is relevant to financial professionals who are considering offering Model Portfolios to their clients.
The Markets Continue to Rethink the 60/40 Portfolio
We believe the traditional 60/40 portfolio will face significant headwinds in meeting investor objectives as we move through this decade and the next. Against this backdrop, Scott Welch discusses how WisdomTree seeks to challenge the traditional 60/40 approach.