The consumer price inflation index has increased while the producer price inflation index has decreased, indicating that production input prices have not risen. This suggests that profit margins may be favorable in the first two quarters of 2024, which usually supports corporate profits.
This year, we may witness fluctuations in growth rates and inflation due to changes in international shipping routes, leading to supply chain disruptions.
Markets are pricing in the possibility of interest rate cuts by the Federal Reserve (the “Fed”) following hints that rates have reached their peak.
The decline in bond yields alongside the core inflation rate reaching 3.9% is only possible in two scenarios:
-A clear slowdown in economic growth, which has not yet been significantly achieved.
-Inflation declining to at least 3%, which has not yet been achieved.
The Fed needs more than a single data point on inflation to determine its direction given the current geopolitical situation and the Red Sea crisis. Also, inflation components must be considered, as one contributing factor to the current increase in inflation is low rents.
At The Family Office, we recommend diversifying investment portfolios. In the current situation, investors should also consider alternative investments and a mix of liquid and illiquid assets.
Investors can find investment opportunities in Japan today, with the country implementing various reform measures amid improved returns on equity and declining price-to-book ratios despite the ongoing market rally. The central bank will also tighten its policy, which will have a positive impact on both interest rates and the currency. Furthermore, rising wages will support consumption.
Saudi Arabia has reduced oil prices to achieve stability and announced 60 Initial Public Offerings (IPOs) this year, alongside the ongoing projects in the country. It’s worth noting that what the country is experiencing is reform rather than imposed regulations, giving momentum to the financial market.
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