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Year-end investment outlook and financial planning strategies

Learn strategies for today’s higher interest rate environment and year-end tax tips in our webinar replay.

At a glance

Risky assets, such as stocks and lower-quality bonds performed well during the Thanksgiving holiday-shortened week. Economic data remains modest, though U.S. holiday spending trends appear solid.

chart depicts global health trend at 35.2 trending weak to 42.0.

Source: Global Economic Health Check, U.S. Bank Asset Management Group, November 24, 2023.

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:

-4.1%

The difference in existing home sales in October compared to September. Sales declined 14.6% compared to a year ago.

 

 

 

 

 

Term of the week:

OPEC+

The Organization of the Petroleum Exporting Countries (OPEC) is a group consisting of 14 of the world’s major oil-exporting nations. OPEC+ also includes 10 OPEC allies, the largest of which are Russia, Mexico and Kazakhstan.


 

 

 

Quote of the week:

“Existing home sales declined 4.1% in October to 3.79 million seasonally adjusted, annualized units, below economists’ consensus forecasts and the slowest sales pace since October 2008. Both single- and multi-family segments drove October’s decline, with single-family sales falling 4.2% while multi-family unit sales fell 2.4%. Rising home prices and the highest mortgage rates in 20 years are challenging first-time and trade-up home buyers, with listed properties remaining near record lows.”

― Robert Haworth, CFA, Senior Vice President, Senior Investment Strategy Director, U.S. Bank

Global economy

Quick take: U.S. leading economic indicators reflect the ongoing divergence between consumer activity and expectations, while elevated home prices and decades-high mortgage rates crimp housing market activity. European purchasing manager surveys improved but highlight ongoing growth challenges across the region.

Our view: The global economy continues to shrug off elevated inflation and rising interest rates, though growth is likely to moderate into year-end. 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 posting superb performance in November. Broad market attention is shifting toward holiday spending.

Our view: Inflation, interest rates and the pace of earnings growth in 2023 and 2024 remain headwinds to advancing equity prices. Still to be determined is whether the pace of inflation is on a sustained downtrend, which would pave the way for the Federal Reserve (Fed) to take a more dovish stance toward interest rates.

Bond markets

Quick take: Mixed bond performance last week stemmed from Treasury yields rising slightly, which served as a headwind to higher-quality bond performance, paired with improving investor sentiment that drove prices higher for bonds with credit risk. As a result, corporate and municipal bonds outperformed Treasuries.

Our view: Most bond categories continue to offer yields near their highest in 15 years. Long-term fixed income allocation targets that are primarily comprised of high-quality bonds help bolster portfolio diversification, while taking modest exposures to esoteric bond categories like reinsurance (insurance-backed bonds) and mortgages not backed by the government can incrementally improve current investment portfolio income.

Real assets

Quick take: Most real assets traded in line with the S&P 500 in light holiday trading last week. Commodities trailed despite a falling dollar, led lower by agricultural goods. Precious metals continue to show strength, potentially signaling future interest rate declines.

Our view: We continue to see value in real assets’ defensive sectors. We favor tangible assets with stable cash flows as the market moves through a period plagued by decelerating economic growth and corporate earnings. Commodities remain vulnerable if 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 Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index and is representative of the U.S. small capitalization securities market. The NASDAQ Composite Index is a market-capitalization weighted average of roughly 5,000 stocks that are electronically traded in the NASDAQ market. The Conference Board Leading Economic Index is intended to provide an early indication of significant turning points in the business cycle and where the economy is heading in the near term.

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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Investment products and services are:
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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.