An unexpected positive development can be found in the stock market.
The temporary halt of the booming 2024 stock rally has dampened morale on Wall Street. Traders worry that the sustained high-interest rates will lead to high borrowing costs for consumers, squeeze corporate profits, and weigh down the market.
However, history shows that higher-for-longer rates do not necessarily mean significant losses for portfolios, even if there may be little room for further growth.
Since the introduction of the benchmark S&P 500 index, it has increased by an average of 13% during Fed pause periods, according to LPL Financial data from the past 35 years. Over six stretches when rates held steady, the S&P 500 rose by 14%, from the time of the last rate hike in July 2023 through the end of the present period.
As Jeff Buchbinder, chief equity strategist at LPL Financial, observed in a recent note, these prolonged pauses are typically favorable for stocks. The worries about declining stocks occur when the Fed is forced to cut rates due to economic weakness, not in the current situation.
In spite of the Fed's aggressive battle against inflation that has led to sky-high rate levels, the US economy has proven to be resilient. The labor market remains strong, consumer spending continues to be brisk, and stocks have broken numerous records.
Despite these positive economic signs and data suggesting persistent inflation, there have been fears that the Fed would raise rates again. However, the Chair of the Fed, Jerome Powell, eased concerns during his speech at the Federal Open Market Committee's post-meeting press conference.
While the Fed has forecasted a total of three rate cuts for 2024, various economists maintain that the central bank may still ease rates at least once or twice this year. Traders expect the Fed to commence easing rates in autumn, according to the CME FedWatch Tool.
The April jobs report brought encouraging signs that the labor market is cooling without collapsing. The economy added 175,000 jobs last month, which is a decrease from the revised 315,000 jobs added in March and in line with pre-pandemic levels. Additionally, first-time applications for unemployment benefits climbed last week to 231,000, the largest number since August 2023, another sign of a cooling labor market.
Furthermore, annual wage gains, a closely-watched potential inflation trigger, have dropped to their lowest level since May 2021, along with payroll growth. The slowdown in wage gains and payroll growth in April offers hope that the Fed can control inflation without sparking a recession, according to certain investors.
Barclays' David Russell hinted at this in a note, stating, "The case for rate cuts gained a bit of strength. Perhaps 'Goldilocks' is making a comeback."
US government teams up with banks to form a cybersecurity alliance, Project Fortress
The US government is forming an alliance with Wall Street to bolster the financial sector's defenses against cyberattacks, which pose a significant threat to our economy. The partnership, known as Project Fortress, reveals the severity of the perceived danger posed by hackers to banks, according to a letter sent to CEOs by a senior Treasury official and viewed by CNN.
The new public-private alliance incorporates defensive measures such as a cyber hygiene tool that scans companies for vulnerabilities and a new automated threat feed. However, the alliance goes beyond defense. US Deputy Treasury Secretary Wally Adeyemo stated in a letter sent to bank trade groups this week that it also involves "offensive actions" that use Treasury's national security tools and US law enforcement to send a clear message to potential adversaries that they will face consequences for their cyberattacks against the US financial system.
These national security tools include deploying Treasury's sanctions team, as revealed by a person familiar with the situation.
Find more information here.
India's most affluent billionaires join its most contentious election
Two of the wealthiest businessmen in the world, Mukesh Ambani and Gautam Adani, are getting involved in the highly divisive Indian election, Diksha Madhok reports.
India is experiencing a massive general election where Prime Minister Narendra Modi is likely to secure a third consecutive term. Ambani and Adani are both fans of Modi's economic progress over the past ten years.
While Modi is reliant on these billionaires' support, they could face backlash due to their extreme wealth.
For more details, see Diksha Madhok's report.
These two men are similar to the industrialists who contributed to the rise of America's 'Gilded Age.' Their vocal support for Modi has attracted harsh criticism from rival politicians.
In a recent election rally, Modi seemed to accuse his main political competitor of receiving money from Mukesh Ambani, head of India's most valuable private firm, Reliance Industries, and Gautam Adani, founder of the Adani Group, a conglomerate specializing in ports and energy.
During the rally, Modi questioned, "Why has Shahzade Ji stopped talking about Ambani and Adani during this election? People are starting to suspect a hidden deal." The term "Shahzade" refers to Rahul Gandhi, who has been the face of India's main opposition party, the Indian National Congress, for a long time.
"How much money have you received from Ambani and Adani?" Modi inquired at the rally.
For more information, visit the link provided.
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Given the text, here are two sentences that incorporate the words 'business' and 'investing':
Given the resilience of the US economy and the positive economic signs, some investors may see this as an opportunity for business expansion or investing.
Despite the fears of rising interest rates, some businesses and investors might see this as a chance to secure funds at lower rates before they increase again.
Source: edition.cnn.com
