Federal Reserve and Monetary Policy
The Federal Reserve has maintained its policy rate at 5.25%-5.5%, with potential rate cuts anticipated in the latter half of 2024. This cautious stance is driven by mixed economic signals and the need to monitor inflation trends closely. While there has been some moderation in inflation, core inflation, particularly in the services sector, remains a focal point of concern for policymakers (Home) (Deloitte United States).
Consumer Spending and Income
Recent data indicates a slight decline in US household income and spending when adjusted for inflation. From March to April, consumer spending fell by 0.1%, reflecting a weaker start to the second quarter of 2024. Despite this, the personal savings rate has remained steady at 3.6% of disposable income. The Personal Consumption Expenditures (PCE) deflator, the Federal Reserve’s preferred inflation measure, showed a consistent annual inflation rate of 2.7% in April (Deloitte United States) (J.P. Morgan | Official Website).
Housing Market
The US housing market has shown signs of stabilization at lower levels, despite elevated mortgage rates. Home prices continue to rise, driven by a tight supply. The S&P Case-Shiller index reported a 7.4% year-over-year increase in home prices for March, marking the ninth consecutive month of gains (Deloitte United States) (JPMorgan Asset Management).
Labor Market
The US labor market remains robust, adding an average of 250,000 jobs per month into early 2024. The unemployment rate has consistently stayed below 4% since December 2022, the longest streak since the late 1960s. This strength is partly due to increased immigration, which has boosted the labor supply and helped moderate wage pressures (JPMorgan Asset Management).
Global Economic Outlook
Globally, the economic growth forecast remains steady but subdued. The International Monetary Fund (IMF) projects a global growth rate of 3.1% for 2024, slightly rising to 3.2% in 2025. Key factors influencing this outlook include elevated central bank rates, reduced fiscal support, and ongoing geopolitical tensions (Deloitte United States) (J.P. Morgan | Official Website).
Market Reactions
Financial markets have been rallying hard, reacting to Federal Reserve announcements and economic data releases. The S&P 500 and Nasdaq continue to make all time highs.
What does this mean for our trades?
The markets are surging, and there is very little that seems to stop them. Even in the midst of dramatic wars raging and the ‘moving away’ from the Dollar in the East, markets are only going up. It is something to be cautious of and may be a good time to diversify into assets outside of the US. In terms of short to medium term trading, looking for pullbacks on the 4 hourly chart could be the way forward for the rest of 2024.
