Economic growth as measured by Gross Domestic Product (GDP), is slowing down as expected, compared to the strong growth we saw at the end of 2023. Economists and the Federal Reserve expect the economy to grow by about 2% in 2024, which they see as a balanced and stable scenario for investors.
This year, the S&P 500 index has risen nearly 15%, reaching new record highs. Investors are hopeful because they anticipate the Fed will lower interest rates, and they're optimistic about advancements in artificial intelligence.
Small companies and value stocks that currently have good valuations when compared to large company growth stock, but haven't performed as well. Similar to last year, the stock market has been mainly driven up by large technology companies that have a big weighting in the indexes. Lower interest rates could provide opportunity for stronger performance for small company stocks, which depend on affordable credit.
International stocks have struggled too, partly because the U.S. dollar is strong, which lowers the value of investments in other countries when converting cheaper foreign currencies into currently high priced dollars.
Bonds had a tough start to the year but have been recovering lately. Overall, both the stock and bond markets haven't changed much recently. Some experts think there could be more volatility ahead because prices are quite high and only a few of investments are doing exceptionally well and driving the indexes higher.
Bonds are seen as a good way to spread out risk, and they offer higher interest rates than some other investments. Current short term interest rates are quite good, but moving to longer term bonds before interest rate cuts might be a good move to look in current yields and perhaps profit from increases in bond prices resulting from lower interest rates on new bonds.
The views stated herein are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 – A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.