Market Update: September 27th, 2024

Federal Reserve Actions

• Recent rate cut of 50 basis points

  • The cut was not due to poor economic conditions but because inflation has decreased significantly.

  • The Fed aims to reduce rates further toward a neutral rate of 3%, but some debate it could be closer to 4.5%.

• More rate cuts are expected through 2025, potentially lowering the Fed funds rate by 250 basis points in total.

• Ongoing inflation risks remain unclear, market confusion persists due to strong economic data combined with significant rate cuts.

Economic and Labor Market Data

• U.S. economy is not in a recession, despite a slight rise in unemployment.

  • Unemployment increases are due to immigration and labor supply growth, not mass layoffs.

• Positive indicators include low default rates, strong consumer spending, and robust corporate health.

• Credit markets remain stable, with defaults and bankruptcies declining.

• Potential labor market weakness:

  • August labor report showed significant full-time job losses but gains in part-time employment.

  • Unemployment expected to rise gradually due to weakening job quality.

Economic and Inflation Projections

• GDP growth is projected to slow to 2% in 2024.

• Inflation is expected to decline but may stay slightly above target levels.

• The Fed is focusing more on unemployment control than inflation, signaling a shift toward softer monetary policy.

  • Rate cuts could lift GDP by 2% and Inflation by 1%.

• Potential risk of reigniting inflation, especially in the housing market, as lower mortgage rates may drive demand.

Global and Domestic Trends

• China's monetary and fiscal stimulus (rate cuts and easing mortgage terms) should support its equity markets.

• U.S. commercial real estate may benefit from the Fed's rate cuts, easing refinancing conditions for the sector.

• "Soft-Landing" scenario most likely, where the economy may experience a period of light stagflation, where moderate growth continues but inflation remains higher than desired.

  • While the base case points to a soft landing, there is still a 30% risk of recession, so vigilance is necessary to protect against potential economic downturns.

Risks and Challenges

• Key risks include:

  • Continued job losses and private sector contraction, leading to a possible stagflation scenario (moderate growth with persistent inflation).

  • Fiscal dominance (where fiscal policy dictates monetary decisions) could increase inflationary pressures.

• Investors should remain prepared for elevated inflation and potential policy shifts that could impact financial conditions.

• Ongoing conflict in Ukraine and Israel.

• Ongoing political uncertainty amidst the U.S. election.

Portfolio Implications

• With inflation likely to stay elevated, we will stay focused on inflation-sensitive assets:

  • Bonds/Fixed Income:

    • Investment Grade Bonds, Floating Rate Notes, Real Estate Income, High-Yield Bonds.

    • Yields have potential to remain higher than during the 2008-2022 period, so it's important to keep portfolios positioned accordingly.

  • Equities:

    • Equities with strong free cash flow and established business models.

    • Mid- and small-cap equities continue to look promising.

  • Real assets & commodities:

    • Gold, Silver, Copper, & Natural Gas remain promising.

    • Real Estate/Income yields are above average.

If you have any questions or would like to discuss these updates further, please don’t hesitate to reach out. I look forward to continuing to guide you through these market changes and ensuring your portfolio is well-positioned for the future.

Chris Rasmussen, AAMS® CRPS®

Advisor/Owner, Cantorbridge Financial

Cantorbridge Weekly Update September 27", 2024

Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA and SIPC, and SEC-Registered Investment Advisors. This message and any attachments hereto contain

information that is confidential and is intended for use only by the addressee. If you are not the intended recipient, or the employee or agent of the intended recipient responsible for delivering the

message, you are notified that any review, copying, distribution or use of this transmission is strictly prohibited. If you have received this transmission in error, please (i) notify the sender immediately by email or by telephone and (ii) destroy all copies of this message.

Cantorbridge Financial | 4364 Town Center Blvd Ste 211, El Dorado Hills, CA 95762 | 916.693.5073