Welcome to the March edition of FAQ’s and RAQ’s!
Here we answer client questions -- some asked Frequently, and others asked Rarely.
FAQ: How long can the bull market last?
Short answer: Nobody knows! However, we can offer a framework for what may come next:
The 2024 rally has been fueled in part by a rare situation: the Federal Reserve may cut interest rate despite a strong economy. Typically, the Fed cuts rates when the economy is weak. Even so, the Fed fears that interest rates are too high and would prefer to cut rates if (and that's a big if) inflation falls toward its target of 2%.
There’s little precedent for the Fed cutting rates while the economy is strong. One example was in 1998 when turmoil in Asian prompted the Fed to cut rates as insurance against a recession in the U.S. The result? Big gains for stocks in 1999.
Could history repeat? Potentially! On the other hand, if the Fed keeps rates high it could cause a recession. Thus, it seems that both up and down scenarios for stocks are on the table for the remainder of 2024.
RAQ: How will the U.S. Presidential election affect markets?
We’re being facetious when we refer to this as a “Rarely Asked Question.” The election is very much top of mind for investors. Surprisingly, however, we’ve noticed less investor angst than usual this election cycle.
Why?
Perhaps because the election is a rematch. Both candidates are familiar to investors and neither has been a barrier to higher stock prices. This contrasts with the typical election when at least one of the candidates is a new face.
A presidential rematch is unprecedented for investors. The last election rematch was in 1956: President Eisenhower vs. Adlai Stevenson. However, the last rematch between two presidents was in 1892: Grover Cleveland vs. Benjamin Harrison.
How’d markets fare that year? We can’t say! The Dow Jones Industrial Average wasn’t created until four years later.
Have a question? Drop us a line at carlsongroup@rwbaird.com. We'd love to hear from you!
All investments carry a level of risk, including loss of principal. PAST PERFORMANCE DOES NOT PREDICT FUTURE RESULTS. It is not possible to invest directly into an index.