by Dominic Ceci | Johnson Financial Group • August 15, 2024
2 minute read time
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Economy
The probability of recession was high a year ago as Leading Economic Indicators (LEI’s) pointed to recession. LEI’s remain negative, but it seems government spending was able to offset the impact of higher interest rates an inflation.
While economic growth remains resilient overall and the probability of recession has declined, bifurcations exist with some segments of the economy struggling.
Strong economic growth has allowed the Fed to focus on inflation, which remains sticky near 3%.
Markets
Lower interest rate volatility combined with reduced recession risk has supported global stock markets with double-digit gains in 2023 and mid-single digit gains YTD.
Bonds on the other hand are flat on the year with higher interest rates offsetting interest income.
Positioning
Our outlook is balanced with either a shallow recession or soft landing as the most probable scenarios in our view.
Markets appear increasingly priced for a soft landing and not recession demonstrated by above average equity valuations and tight credit spreads. Therefore, portfolios are positioned with a more conservative, less economically sensitive stance.
Given this outlook, we recommend rebalancing portfolios as appropriate as part of a disciplined investment management process.
U.S. Election
Markets typically experience more volatility as uncertainty increases ahead of an election. However, over the long term any impact is hard to measure.
Things that may influence markets include: health/ability of candidates to serve, tax policy, approach to regulations, tariffs and deficits
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This information is for educational and illustrative purposes only and should not be used or construed as financial advice, an offer to sell, a solicitation, an offer to buy or a recommendation for any security. Opinions expressed herein are as of the date of this report and do not necessarily represent the views of Johnson Financial Group and/or its affiliates. Johnson Financial Group and/or its affiliates may issue reports or have opinions that are inconsistent with this report. Johnson Financial Group and/or its affiliates do not warrant the accuracy or completeness of information contained herein. Such information is subject to change without notice and is not intended to influence your investment decisions. Johnson Financial Group and/or its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared. Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Certain investments, like real estate, equity investments and fixed income securities, carry a certain degree of risk and may not be suitable for all investors. An investor could lose all or a substantial amount of his or her investment. Johnson Financial Group is the parent company of Johnson Bank and Johnson Wealth Inc. NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE
