The price-to-earnings ratio of the S&P 500 index has declined from 22 to 20, suggesting that market volatility may persist due to expectations about earning growth for next year. If expectations remain at the 11% as currently expected, we may see some stability.
Focus should be on the outlook for economic slowdown. Weekly US jobless claims will indicate whether the economic slowdown will worsen.
We will learn more about the likelihood of interest rate cuts from the Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole symposium of central bankers at the end of this month. At The Family Office, the probability of interest rate cuts in our forecasts has increased, and we expect a 0.5% cut at the September meeting.
Every 1% cut in interest rates is likely to lead to an increase in equity or asset valuations between 20 and 30%.
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