September 2024 Financial Market Trends and Impacts
1. Interest Rate Reductions on the Horizon
The Federal Reserve is expected to reduce interest rates in its upcoming September meeting. This comes as inflation continues to cool, with the Consumer Price Index (CPI) showing only a 2.5% annual increase in August, down from 2.9% in July. Lower inflation rates have prompted speculation of a 25 to 50 basis point cut in the federal funds rate. These cuts will likely make borrowing cheaper, benefiting sectors like real estate, technology, and finance, while easing household debt pressure
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2. Credit Card Debt Reaches New Highs
Despite falling inflation, consumer debt is climbing. U.S. credit card debt hit $1.14 trillion in Q2 2024, an 11% rise compared to the previous year. High interest rates are driving this surge, with many consumers struggling to keep up with the cost of borrowing. This trend highlights the financial strain many are facing even as inflation eases
3. Yield Curve Uninverts, But Small Business Sentiment Declines
The yield curve, which had been inverted for much of the past year, returned to positive territory in September 2024. This is a sign that markets may be anticipating less economic strain moving forward. However, small business optimism dropped to its lowest level in months, as concerns about higher costs and weaker demand persist
For investors, these changes suggest a more favorable environment for stock markets and bonds, while consumers may need to prepare for continued financial pressure from high debt levels despite lower inflation.
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