THE FEDERAL RESERVE
It has been so long since the Federal Reserve had a “normal” easing cycle that many investors seem to have forgotten an important distinction: the Fed only cuts the overnight rate, not all interest rates. In fact, long-term rates often go up when the Fed is making rate cuts.
THE INCUMBENCY PARADOX
According to Ballotpedia.com, some 95% of incumbents, nationwide, won their races. That seems to be about the norm. So much for “draining the swamp.” It seems everyone hates Congress but loves their congresspeople.
THE U.S. DOLLAR
The U.S. dollar strengthened in the global currency markets, despite the Fed cutting rates. This wouldn’t have happened if the remainder of the world’s primary economies were functioning at a high level. They aren’t.
THE DONALD TRUMP EFFECT
Americans are predisposed to distrust what their politicians tell them. There is one exception, Donald Trump. Everyone apparently believes everything that comes out of his mouth, even when he doesn’t believe all of it himself.
THE EFFICIENCY GAP
Despite all of the advancements in technology, the U.S. elections revealed that we still struggle with basics. In this case, counting ballots in a timely manner. However, you can take your pick of any number of other examples.
THE MEDIA VS. REALITY
If you were to only take the media’s word for it, Americans are at each other’s throats. However, it is incredibly difficult to find that same level of animosity between actual people.
THE REALITY OF BONDS
Bond investors seeking safety always seem surprised when they go down in value. However, rising interest rates, especially on the long end, make this inevitable. It is just the math. It has always been this way, and always will be.
THE BITCOIN BAROMETER
About the time everyone has forgotten about cryptocurrencies, they come roaring back to life, and everyone wants to jump in. Trust me, when my 88-year-old father starts asking about Bitcoin, it’s time to sell. We’ll call it the Jack Norris Barometer.
THE REBALANCING EFFECT
A trend in the international sector seems to be emerging. Foreign stocks often do their best in the 4th quarter. This is likely driven by institutional investors rebalancing their portfolios at year end and adding to their underperforming investments to meet target weighting(s).
THE GOVERNMENT GAP
There was a lot of frustration over the federal government’s relief efforts for Hurricanes Helene and Milton. This underscored a very basic truth. We don’t pay the government enough for it to be everything we want it to be. However, we pay too much for what it actually is.
TECH STOCK CRAZE
Americans love their tech stocks. It doesn’t appear to matter what the valuations are, as that is where the growth is going to be. While this approach seems intuitive, history suggests investors can suffer a lot of short-term pain in exchange for the long-term gain.
HOW NOW, DOW?
Yet another quarter has passed, and no one has given a good reason why anyone should still care about the Dow Jones Industrials Average.
CASH AND CONSEQUENCES
Inflation remains a challenge for the average American consumer, though not as severe as in the past two years — at least according to authorities. However, something suggests monetary policy alone isn’t going to solve the issue this time. Washington simply has to quit flooding the economy with cash.
This content is part of our quarterly outlook and overview. For more of our view on this quarter’s economic overview, inflation, bonds, equities and allocations, read the latest issue of Macro & Market Perspectives.
The opinions expressed within this report are those of the Investment Committee as of the date published. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders or employees.