Downturn

The U.S. economy is gradually shifting towards a situation where the Federal Reserve is near a rate cut. Despite higher-than-expected economic growth in the second quarter of 2024, economic momentum indicators are starting to weaken. The central bank aims for a “soft landing,” targeting inflation reduction without triggering a recession. So far, this strategy seems successful, as price pressures decrease without a significant rise in layoffs, with employers opting to reduce hiring instead of cutting existing jobs. In case of a more pronounced downturn, Fed Chair Powell stated that the central bank would take action but clarified that it is not considering rate cuts of half-percentage point increments.

Global indexes were dynamic in July 2024, with the “magnificent seven” stock prices declining, while more mid-small caps have increased due to lower inflation expectations. Some large-cap stocks have reported weaker earnings due to high expenses, particularly related to AI expansion. AI-related stocks, especially from hardware producers, have performed well, and we expect more AI-implementing stocks to do so too. We believe the global stock market can still perform despite the anticipated economic slowdown, which is expected to lead to a lower monetary policy rate.