We are here to empower you to live your best possible life through comprehensive financial advice. We do this by getting to know you and what is most important to you and developing a strategy tailored to your unique situation.
Invest Blue has a number of offices conveniently located in rural, coastal and city locations across QLD, NSW, ACT, TAS and VIC. All of our offices are supported by an operations team of technical advice, research, client experience, compliance and IT specialists.
Explore a range of topics to broaden your financial knowledge and access useful tools and resources to help you get a better understanding of your financial position and where you have the opportunity to make improvements.
The market timeline for the first U.S. rate cut shifted after the Fed’s latest meeting
Q4 earnings reports from U.S. companies have been a mixed bag so far
We estimate China will achieve a GDP growth rate of 4.5%-5.0% this year
On the latest edition of Market Week in Review, Investment Strategist Alex Cousley and Sophie Antal-Gilbert, Head of AIS Portfolio & Business Consulting, discussed the latest U.S. Federal Reserve (Fed) and Bank of England (BoE) policy meetings. They also provided an update on the fourth-quarter earnings season and assessed the 2024 economic outlook for China.
Fed pushes back on notion of March rate cut
Antal-Gilbert and Cousley opened the conversation by reviewing highlights from the Fed and BoE policy meetings, both of which took place the week of Jan. 29. Cousley said the key takeaways from both meetings were that monetary policy has peaked for the cycle and that rate cuts are on the way.
Focusing on the Fed first, he said that Chairman Jerome Powell pushed back a bit on the idea of an initial rate cut in mid-March, noting that U.S. central bank officials want to make sure inflation is continuing to decline before starting to lower borrowing costs. “Before Chair Powell’s Jan. 31 remarks, markets had moved toward the idea of the Fed cutting rates in mid-March. In the wake of his comments, markets now think a first rate cut in May is more likely,” Cousley stated, noting that investors are pricing in a cumulative 145 basis points of easing by the end of 2024.
In his opinion, these expectations are reasonable if the U.S. economy can achieve a soft landing—where economic growth cools but a recession is avoided. However, Cousley stressed that he believes the risks for a U.S. recession this year still remain elevated—and that if one were to strike, further rate cuts would be likely. Because of this potential for interest rates to fall further than markets expect, Cousley sees U.S. government bonds as an attractive opportunity for investors.
Shifting to the BoE, Cousley said the UK central bank will probably trail the Fed in slashing rates, with markets expecting a first rate cut by the BoE in June. “Inflation is still a bit higher in the UK than in the U.S., which is why I think the BoE will lag the Fed, but rate cuts in the UK are on the horizon for this year,” he stated. Cousley added that the European Central Bank (ECB), which met last week, is also likely to begin lowering lending costs this year, perhaps sometime in the spring.
The early read on Q4 earnings season in the U.S., Europe and Japan
The discussion pivoted to corporate earnings, with Antal-Gilbert asking Cousley how the fourth-quarter earnings season is shaping up in the U.S. and elsewhere. Cousley said that generally speaking, the season has been faring OK in the U.S., with some disappointing results in the financial sector but strong results from a few big tech companies, including Amazon and Meta.
“Both of these companies reported better-than-expected Q4 earnings, which led to a big rally in share prices,” he remarked, noting that Amazon stock rose nearly 5% in after-hours trading on Feb. 1, while Meta stock jumped by 14%.
On the contrary, shares of New York Community Bancorp (NYCB) plunged the week of Jan. 29 after the bank—which purchased some of the assets from Signature Bank after it failed during last March’s banking crisis—reported a large fourth-quarter loss, Cousley said. He explained that NYCB has a large exposure to the struggling commercial real estate sector.
“At Russell Investments, we’ve spoken to our underlying money managers about NYCB’s woes, and right now, they see this as an idiosyncratic issue specific to NYCB, rather than part of a broader risk to regional banks,” Cousley remarked.
He said that outside of the U.S., the fourth-quarter earnings season is still in the early stages, but that so far, the story has been less positive. Japan has had some decent beat rates but also some big misses, Cousley explained, while European corporate earnings have generally been on the disappointing side.
Unpacking China’s 2024 growth outlook
Antal-Gilbert and Cousley wrapped up the segment by assessing the 2024 growth outlook for China, with Cousley noting that the latest PMI (purchasing managers’ index) readings from the country’s services sector came in better than expected.
Cousley stated he expects around 4.5% to 5.0% GDP (gross domestic product) growth in China this year, which he said would be a fairly good outcome for the world’s second-largest economy. However, he stressed that more stimulus measures from the government will likely be needed for this type of growth to be achieved. “There have been some headlines from China recently about an economic stimulus package and cuts to its reserve requirement ratio, but these types of things aren’t enough to get the economy moving,” Cousley remarked.
He noted that China’s national legislature will convene in March, with the government set to announce its GDP target for the year.
“If that number comes in above 4.5%, I believe China will need to inject some serious stimulus into its economy to kickstart growth for this year,” Cousley concluded.
Important note: Market Week in Review is a weekly market update on global investment news in a quick five-minute video format. It gives you easy access to some of our top investment strategists.
Watch every Friday, and our experts will keep you informed of key market events and provide you with an easy-to-understand outlook on the week ahead. Join industry leaders Erik Ristuben, Paul Eitelman, Adam Goff, Mark Eibel, and other industry-leading experts.
