Market developments
Equities: The S&P 500’s reached its 39th record high in 2024 and climbed over 1% this week following the Federal Reserve’s recent half-point rate cut. Despite the recent optimism from the Fed’s actions, analysts warn of underlying economic risks as some strategists believe the current equity market optimism could signal a risk of a bubble, making bonds and gold appealing as hedges against potential recession or inflation.
Fixed income: Even with the Federal Reserve’s recent half-point rate cut, Treasury yields increased this week, driving bond indices lower. This was driven by a shift in the dot plot, which now suggests that the Fed is ready to implement an additional 50bps of cuts for the remainder of this year (25bps less than what the market has priced in).
Commodities: The Fed’s recent cut was seen as a strong start to a new easing cycle, which is generally bullish for gold as lower rates reduce the opportunity cost of holding non-yielding assets like bullion. Even as gold hits new all-time highs, analysts anticipate a potential short-term pullback due to extreme positioning among investors. However, they expect falling rates to support gold’s upward trend.