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2024 Investment Outlook

Capitalizing on today’s market opportunities to meet your financial goals.

At a glance

Elevated U.S. inflation data and rising tensions between Iran and Israel in the Middle East pressured U.S. stocks and bonds last week.

chart depicts global health trend at 40.3 trending weak to 65.7.

Source: Global Economic Health Check, U.S. Bank Asset Management Group, April 12, 2024.

U.S. Bank Global Economic Health Check

The U.S. Bank proprietary Global Health Check incorporates more than 1,000 data points — including business climate factors and economic sector categories for 22 major economies representing 80 percent of total global wealth — to reflect our view of the current strength of worldwide economic growth.

Number of the week:

3.5%

The increase in the Consumer Price Index in March compared to a year earlier. That is up from 3.2% in February.

 

 

 

 

Term of the week:

Real estate investment trust (REIT)

A company that owns, operates or finances income-generating real estate. Like mutual funds, REITs pool the capital of numerous investors, allowing individual investors to earn dividends from real estate investments without having to buy, manage or finance any properties themselves.

 

Quote of the week:

U.S. equities are retreating following robust first quarter performance. The popular broad-based indices are down between 1.2% and 5.7% in the first two weeks of April, with nine of 11 sectors negative as of Friday’s close. For the year, the S&P 500 is up 7.4%, with 10 of 11 sectors advancing. So far, the April pullback is within the normal ebb and flow of an upward-trending market.

Terry Sandven, Portfolio Manager, Chief Equity Strategist, U.S. Bank

Global economy

Quick take: Inflation remains elevated in the United States, while China is seeing slowing price pressures. Higher U.S. prices are weighing on consumer and small business sentiment.

Our view: The global economy continues to see moderating growth, especially across manufacturing activity. Global inflation continues to decelerate. Despite higher interest rates, the U.S. Bank Economic team sees conditions consistent with a soft landing in the U.S.

Equity markets

Quick take: U.S. equities are in retreat mode following recent indications of persistent inflation and rising geopolitical tensions. On balance, inflation, interest rates and earnings remain consistent with higher equity prices.

Our view: Persistent inflation is weighing on near-term valuations while geopolitical tensions rise and the first quarter earnings period ramps. Enthusiasm around artificial intelligence companies continues to support of higher U.S. equity prices. More broadly, inflation, while persistent, appears to be waning, interest rates are elevated but with downside bias and 2024 earnings projections have stabilized.

Bond markets

Quick take: Treasury yields rose last week in reaction to elevated inflation data. Investors trimmed interest rate cut expectations, now indicating the likelihood of just under 0.50% in cumulative rate cuts in 2024. Municipal bonds performed well, but rising Treasury yields and tepid investor risk appetite weighed on most other bond categories last week.

Our view: Normal fixed income allocations primarily consisting of high-quality debt with moderate interest rate sensitivity provide meaningful income and can help navigate heightened uncertainty tied to restrictive monetary policy, stubborn inflation and geopolitical risks. The extra yield in slightly longer-term and lower-quality municipal bond exposure can benefit investors over time.

Real assets

Quick take: Commodities were the best-performing sector in real assets again last week with Middle East tensions remaining front and center. Surprisingly, Energy was down on the week, but mining companies continue to enjoy strong support. Real Estate was hurt the most by the move higher in interest rates.

Our view: Diversified publicly traded real estate trusts remain inexpensive relative to private real estate. Tangible assets with stable cash flows present relative opportunities if currently strong investor sentiment erodes. Commodities remain vulnerable if consensus expectations for falling inflation and decelerating growth come to fruition.

Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.

Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation. The Michigan Consumer Sentiment Index is a monthly survey of consumer confidence levels in the United States conducted by the University of Michigan. The survey is based on telephone interviews that gather information on consumer expectations for the economy. The National Federation of Independent Business Small Business Optimism Index is a composite of 10 seasonally adjusted components. It provides an indication of the health of small businesses in the U.S., which account for roughly 50% of the nation's private workforce.

Insights from our experts

How we approach your long-term investing success

We use a data- and process-driven three step methodology to develop an investment strategy unique to you.

The debt ceiling debate in focus

With the U.S. government’s authority to borrow money bumping up against the federally mandated debt limit this year, is a political confrontation brewing that could impact capital markets?

How we analyze the economy

The economy doesn’t just move in a straight line. Our Health Check assesses its direction and how fast it’s moving.

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Disclosures

Investment products and services are:
Not a deposit • Not FDIC insured • May lose value • Not bank guaranteed • Not insured by any federal government agency

U.S. Wealth Management – U.S. Bank is a marketing logo for U.S. Bank.

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This information represents the opinion of U.S. Bank Wealth Management. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.

Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio.

Diversification and asset allocation do not guarantee returns or protect against losses.

Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. 

Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.

Investments in fixed income securities are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in fixed income securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities.

Investments in high yield bonds offer the potential for high current income and attractive total return, but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer’s ability to make principal and interest payments.

The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes, but may be subject to the federal alternative minimum tax (AMT), state and local taxes.

There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).

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The information provided represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.

U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.