MID-YEAR MARKET RECAP
As we continue
through 2024, we’d like
to reflect on the
events, trends, and
other developments
thus far that defined
our economics, policy,
business, and culture,
and look at what the
rest of the year has in
store.
Casey, Mark, et al. “Separating AI Hype from Investment Opportunity.” CapitalGroup NACG, 3 May 2024, www.capitalgroup.com/ria/insights/articles/separating-ai-hype-investment-opportunity.html.
Aliaga-Díaz, Roger. “Why We Expect the Fed to Remain Cautious.” Vanguard, 13 Mar. 2024, advisors.vanguard.com/insights/article/why-we-expect-the-fed-to-remain-cautious.
2 RETROSPECT
It’s natural for investors to look for a connection between who wins the White House
and how financial markets will respond. However, the outcome of an election is only
one of many inputs to the market. The economic data for nearly 100 years of U.S.
presidential terms shows a consistent upward march for U.S. equities regardless of
the administration in place. This is an important lesson on the benefits of a long-
term investment approach.
Election Season
The AI hype cycle has continued to gain fuel
as businesses and individuals quickly adopt
AI tools. OpenAI, the developer of ChatGPT,
has reported over 100 million weekly users
by the start of 2024, including two million
developers and over 90% of Fortune 500
companies. Investor excitement has
turbocharged share prices for the most
visible enablers of generative AI, including
NVIDIA, Meta Platforms, and Microsoft, an
investor in OpenAI.
Companies have been experimentally
implementing AI features to improve
efficiency and productivity. From scientific
and medical discovery, product
development, industrial and robotic
automation, and IT services, businesses are
taking advantage of AI capabilities.
Rather than focusing on attention-grabbing
headlines about massive job loss or the rise
of sentient robots, notice the declining cost
of AI adoption, the advancement in
generative models, and identifying early
adopters that use the technology to gain a
competitive advantage.
As of mid-April, the latest inflation and
labor market data imply that U.S.
production of goods and services remains
healthy and underscore our view that
continued economic strength might
prevent the Federal Reserve from cutting
interest rates in 2024.
Faced with persistent inflation above its
2.00% target and the risk of financial
conditions easing too rapidly, the Fed will
move cautiously and likely maintain its
federal funds rate target around its
current range of 5.25% to 5.50% for the rest
of 2024.
Given policy interest rates aimed at
subduing inflation by restricting economic
activity, we would not have expected GDP
growth as robust as 3.0% in 2023. We
foresee economic growth around 2.0% for
2024 and a year-end unemployment rate
around 4.0%.
Artificial Intelligence Hype
Economy & Markets