Commentary
SEI Forward
The third quarter prepared investors well for the upcoming Halloween season.
SEI Forward
Trick or treat?
The third quarter prepared investors well for the upcoming Halloween season as several pivotal events heightened uncertainties regarding the direction of the economy, geopolitics, and capital markets. Will central banks deliver the treat of a soft landing, or will subsiding inflationary trends prove to be a temporary trick as stimulus measures and spreading geopolitical tensions act as catalysts for a reversal? Is broadening equity market performance a reflationary treat as the global economy remains robust and financing rates fall, or just the trick of a short-term junk risk rally? Finally, will long-term interest rates treat investors by following short-term rates lower or will the summer rally prove to be just a trick upended by overly simulative monetary policy and every increasing debt levels?
As we enter the final quarter of 2024, the world’s two largest economies are handing out plenty of sweets in the form of easing monetary policies and a broad range of fiscal stimulus measures that should provide ballast to the global economy. U.S. Federal Reserve (Fed) policy-makers delivered a somewhat surprising 50-basis point interest rate cut in September. It is likely to be followed by an additional 50 basis points of easing by year-end. Reductions in the federal funds rate, particularly of this magnitude, are typically accompanied by a decline in gross domestic product (GDP) and rising credit spreads.
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