Yahoo Finance's latest chartbook includes 33 charts from experts across the industry to the start of 2024. Yahoo Finance spoke to several experts to break down the current market and economic story.
Yahoo Finance reporter Josh Shafer discusses Capital Economics Deputy Chief Economist Andrew Hunter's inflation chart, which compares year-over-year and annualized six-month percentage changes in core PCE.
Carey Cox, an investment analyst at eToro US, brought up a chart of large-cap and small-cap ETFs in the stock market and said that while small-cap stocks are struggling to catch up, “as economic indicators improve… I hope they will catch up.”
Charles Schwab Chief Investment Strategist Liz Ann Saunders' chart focuses on the correlation between the S&P 500 and the 10-year Treasury yield, encouraging investors to look for opportunities across a variety of investments.
Claudia Sahm, founder of Sahm Consulting, breaks down the “Sahm Rule'' which is a recession indicator. “I'm very happy to report…we are not in a recession,” Sahm said.
Josh Schaefer uses a chart of the real federal funds rate from Matthew Ruzzetti, chief U.S. economist and head of U.S. economic research at Deutsche Bank Securities, to explain why the economy is tightening.
Video highlights:
00:00:04 – Yahoo Finance's Myles Udland, Seana Smith, and Josh Schafer introduce new chartbooks
00:00:37 – Josh Schaefer analyzes inflation below the Fed's target rate
00:01:01 – eToro US Investment Analyst Callie Cox
00:01:24 – Liz Ann Saunders, Charles Schwab Chief Investment Strategist
00:01:58 – Claudia Sahm, Founder, Sahm Consulting
00:02:35 – Josh Schaefer talks about the possibility of rate cuts
video transcript
Sheena Smith: Yahoo Finance launches chart book. An overview of key charts from Wall Street's top minds. Join Head of News Miles Udland and Market Reporter Josh Schaefer for insight into what leading market strategists and economists think about his markets and economy in 2024 I received it.
That's a lot to break down, folks. And Josh, you really took the lead for us here for this chartbook. Please tell us how you identified these charts and what we are aiming for with this.
Josh Shafer: Well, we ask all economists and strategists a basic question. The question is: What charts are most important to investors right now? That's why we've published a chart book with more than 30 themed charts from top Wall Street strategists and economists. And I here he is standing next to one theme. It was obvious inflation.
And the chart you're looking at here is PCE, the Fed's priority objective or priority measure, or core PCE. And you can see the blue line here. Core PCE on a 6-month annualized basis. That means it has been below the Fed's target for the past six months.
Carrie Cox: I see this as a historical skeptic's view of the economy, especially given the fact that small-cap stocks often lead in the first year of a bull market. We just didn't see it. However, as economic data improves and leading indicators improve, I expect small-cap stocks to catch up, especially as confidence grows within minutes. And I think that could be one of the biggest storylines in the market this year.
Liz Ann Saunders: On both the fixed income and equity side, we've been saying maintain quality. On the capital side, that means quality-oriented factors such as strong free cash flow and interest coverage, balance sheet strength, and a favorable earnings profile. On the fixed income side, that means you want to avoid really risky areas.
Clearly there are many opportunities for the Treasury. We focus on investment grade stocks rather than high yield stocks or junk stocks. And for some investors, Munis also has an opportunity. But that will vary depending on the investor.
Claudia Sahm: Summer is an opportunity to find out if we are in a recession. So it's an indicator. It doesn't predict anything. And I'm very happy to report that it's in a good location. We are not in a recession.
Looking at the national unemployment rate can tell you a lot about the state of the economy. And we look for relatively small changes over time, especially for recession indicators. That's what's graphed. And every time we go into a recession, the economy increases by more than half a percentage point and continues to do so.
And now it's about 2/10ths of a percentage point. So we are not in a recession.
Miles Udland: On the street, there remains strong optimism that a rate cut will happen, even if it doesn't happen before the March meeting. Yes, that probability has gone down. However, they are still optimistic that they will be able to achieve it by the end of the first half of this year.
Josh Shafer: Well, with current inflation forecasts, most people think inflation will still come down, right? And in our chart book, Yahoo Finance Charts, provided online by Matt Mazzetti of Deutsche Bank. It reminds me of the actual federal funds rate chart in the book. As inflation declines and interest rates remain at the same level, regulation naturally becomes stricter.
