This Is the New Normal

Investors are turning bullish again… Published By Money & Markets, LLC. May 20, 2024 Published By Money & Markets, LLC. May 20, 2024 [Turn Your Images On] [Turn Your Images On] From The Desk of [Matt Clark, CMSA®]( Chief Research Analyst, [Money & Markets Daily]( This Is the New Normal: What's Next as Investors Turn Bullish Again Money & Markets Daily, "Higher for longer." We’ve been hearing it for several months now. It's the Federal Reserve’s rallying cry to keep interest rates steady. At the turn of 2024, the expectation was cooling inflation would prompt the Fed to start cutting rates again. To me, cutting rates in early 2024 was too soon. The data didn’t support that kind of a move. Markets seemed to pay heed to that thought, as the three major U.S. indexes started the year flat and turned down in April. And now, after the Fed decided to keep rates steady in its May meeting, markets stopped caring. Today, I’ll show you why higher for longer is the new normal and why the market shows little sign of slowing down from here. Bullish Investors Have a New Appetite for Risk Under normal circumstances, investors would be uneasy about the third Fed meeting without a rate cut — especially after the central bank had signaled potential rate cuts were in the works. Yet, here we are. Last week, the three major indexes (Dow, S&P 500 and Nasdaq) reached all-time highs, reversing a lackluster April. U.S. Indexes Race Higher In May [Turn Your Images On] [(Click here to view larger image.)]( Since the start of the month, those three indexes (and the Russell 2000 small-cap index) have risen at least 5.5%. One of the big reasons why… Investors’ appetite for risk has reached the highest level since 2021: [Turn Your Images On] S&P Global’s Investment Manager Index is a survey of investment managers to determine investment risk tolerance. Risk appetite grew to 28% in May — a five percentage-point bump from April — which is a complete reversal from the same time last year when the reading was -34%. But what’s the rationale behind this shift? Investors are confident stronger earnings will continue and that the U.S. and global economies will avoid a recession. Do you know what’s not mentioned very much in the survey? Interest rates. That’s because higher for longer is the new normal. Investors provided another indication that bullish trading should continue. It's something we haven’t seen this year… --------------------------------------------------------------- [Turn Your Images On]( [$25 Stock to Fuel the AI Market Boom of 2024]( One secretive company’s new technology is poised to disrupt the AI market – a market that is projected to grow from roughly $500 billion to $200 trillion. That’s a surge of 39,900% over the next six years. Today, you can invest in this one-of-a-kind company for just $25 a share. [Click here for all the details.]( --------------------------------------------------------------- Investors Flip on Near-Term Returns For the first time in 2024, investors shared positive expectations for short-term stock market returns: [Turn Your Images On] The Equity Returns Index — a sentiment reading for investors — went from negative (bearish) in April to positive (bullish) in May. What's more, investors expecting the market to lose value fell to a six-month low of just 23% this month. The bullish sentiment for positive stock returns extended to a vast majority of S&P 500 sectors: [Turn Your Images On] Positive sentiment for the information technology sector increased significantly, while investors were bearish on consumer discretionary and real estate stocks. Bottom line: Fed interest rate decisions still hold some sway over investors, but rather than staring forlornly into a dark tunnel, investors are looking for any sliver of light at the end. As long as there is any glimmer of hope that the Fed won't raise rates, I believe investors will continue to be bullish in the near term. While higher for longer rates would yield flat to lower returns under normal circumstances, we are in anything but now. Higher for longer is the new norm, and investors are fine with that… for the time being. Until next time… Safe trading, [Matt Clark, CMSA®]( Chief Research Analyst, [Money & Markets Daily]( --------------------------------------------------------------- [Turn Your Images On] Consumers Are Out of Cash Consumers have limited resources. They can't spend more than they make for an extended period. Forced to live within their means, they must make choices. In general, consumers have to pay for food and gas — expenses that can't be eliminated. They can cut spending at sporting goods, hobby, musical instrument and bookstores. The [Federal Reserve’s chart]( below — based on the latest retail sales data — shows that consumers are cutting back on discretionary spending to fund necessities. Spending at gas stations (the red line) has increased by 4% in the past year, driven by higher prices at the pump. Grocery store spending (the blue line) increased 1.9%, less than inflation, indicating consumers are cutting back where they can. Spending at sporting goods, hobby, musical instrument and bookstores (the dashed black line) is down 5%. This confirms that discretionary spending is dropping. Inflation may be falling, but it's still hurting families. — Mike Carr, Chief Market Technician, Money & Markets Consumers Cut Back on Discretionary Spending [Turn Your Images On] [(Click here to view larger image.)]( --------------------------------------------------------------- Check Out More From Money & Markets Daily: - [A "BULLISH" CYBERSECURITY STOCK FOR 2024]( - [BORING IS BULLISH: JUST LOOK AT THIS SHIPPING ETF'S RALLY]( - [I HAVEN’T SEEN THIS SECTOR’S BULLISH TREND IN 30 YEARS]( --------------------------------------------------------------- [Turn Your Images On]( Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. 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To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. Your feedback is very important to us so if you would like to contact us with a question or comment, please click here: [( Legal Notice: This work is based on what we've learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2024 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. 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