Day: September 30, 2024

After a blistering run since early 2023, Nvidia (NASDAQ: NVDA) has hit a wall. The stock has surged 730% since the start of last year (as of this writing), but over the past three months, Nvidia has tread water, down roughly 4%.

A number of factors have weighed on the stock. Fears regarding a potential slowdown in the adoption of generative artificial intelligence (AI), rumors about a delayed release of Nvidia’s next-generation Blackwell platform, concerns about a decline in the company’s gross margin, and a pricey valuation have some investors fearing the stock may have gotten ahead of itself.

However, a quick look at the available evidence suggests that while those concerns are understandable, they are also largely unfounded. I believe there’s still plenty of room for Nvidia to run, and I predict the stock will continue to reach new all-time highs into 2025. Here’s why.

A speed bump in the adoption of AI?

The accelerating adoption of AI has helped fuel the run-up in technology stocks since the start of 2023, but investors have begun to wonder if that breakneck pace could continue. There’s evidence that suggests it can.

To close out the calendar second quarter, Alphabet, Microsoft, Amazon, and Meta Platforms all announced plans to increase capital expenditures (capex) for the remainder of 2024, while also laying out plans for significant increases next year. The vast majority of that spending will be allocated to outfitting the servers and data centers needed to support AI. Since these tech titans are Nvidia’s biggest customers, this suggests the company’s growth streak has legs.

Taking a step back and looking at the big picture can also provide context. Generative AI is expected to add between $2.6 trillion and $4.4 trillion to the global economy in the coming years, according to estimates provided by management consulting firm McKinsey & Company. This suggests that the adoption of AI will continue for the foreseeable future.

Blackwell is on track

Reports emerged in early August that Nvidia’s next-generation Blackwell chips would be delayed by as much as three months due to production issues. The stock skidded on these reports as investors feared the worst.

When Nvidia released its quarterly results in late August, CFO Colette Kress put the matter to rest:

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This suggests the reported delays were much ado about nothing.

Fears regarding slowing growth are myopic

When Nvidia reported the results of its fiscal 2025 second quarter (ended July 28), there was much to like. The company generated record quarterly revenue, record quarterly data center revenue, and robust profits. However, there were two issues investors seemed to focus on in Nvidia’s otherwise stellar results.

The first was the company’s gross margin, which declined from a record 78.4% in Q1 to 75.1% in Q2. During the earnings conference call, CFO Colette Kress noted that a combination of product mix and inventory provisions related to the rollout of Blackwell were the culprits.

That said, the company is forecasting gross margins for the remainder of the year in the mid-70% range. While that’s below the record results in the first quarter, it’s still well ahead of Nvidia’s 10-year average gross margin of 62%.

The other issue that seemed to spook some investors was Nvidia’s forecast for its fiscal third quarter, which ends in late October. The company is guiding for record revenue of $32.5 billion, which would represent growth of 79%. That would mark a deceleration from the triple-digit growth Nvidia has delivered in each of the previous five quarters, but it’s still a remarkable performance nonetheless.

Savvy investors knew that the company’s growth rate would eventually slow, particularly as Nvidia faces tough comps from last year. That said, the company’s revenue growth is still exceptional and should be viewed in that context.

Not as pricey as you might think

One of the biggest issues weighing on Nvidia is the notion that the stock is exorbitantly expensive. That view is certainly understandable, given that the stock is currently selling for 57 times earnings, compared to a price-to-earnings ratio of 30 for the S&P 500. However, investors willing to take a step back will see that Nvidia isn’t as expensive as it might appear at first glance.

A quick look at the stock chart reveals that Nvidia is actually trading slightly lower than its average P/E ratio over the past decade. It’s also worth noting that during the past 10 years, Nvidia stock has gained more than 25,000%, evidence that the stock has been — and continues to be — deserving of a premium.

However, a look ahead suggests the stock is even cheaper. Wall Street is forecasting earnings per share of $4.02 for the coming fiscal year, which kicks off in late January. That means Nvidia is currently trading for less than 29 times forward earnings (as of this writing), which is a bargain, particularly given the company’s continuing growth prospects.

An objective view

Given the run-up of Nvidia stock since early last year, it’s understandable that investors are taking a step back to survey the landscape. Yet it’s clear the factors that have been weighing on the stock are much ado about nothing.

Nvidia’s largest customers continue to spend heavily on its products, its next-generation platform is on track, its gross margin remains near a record high, and its valuation isn’t nearly as pricey as it appears at first glance.

This all suggests a clear runway ahead for Nvidia, and I predict that the stock will continue to reach new heights well into 2025.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Prediction: Nvidia Stock Will Surge Into 2025. Here’s Why. was originally published by The Motley Fool

As of 2022, Americans aged 65 to 74 had a median retirement savings balance of $200,000, according to the Federal Reserve. But many older Americans approach retirement with no savings at all and instead rely on Social Security to cover their senior living expenses.

Doing that, though, could result in a pretty miserable retirement. That’s because Social Security might end up paying you a lot less money than you’d think.

What the average monthly Social Security benefit looks like today

The average retired worker today collects $1,920.48 per month in Social Security. That’s a little more than $23,000 per year.

If that number is shocking to you, well, you’re probably not alone. It’s a big misconception that Social Security replaces the majority of workers’ preretirement incomes. If you earn an average wage, you can expect your monthly benefits to replace more like 40% of what you used to earn.

Now, most seniors can manage a 20% to 30% pay cut in retirement, especially since certain expenses do tend to decrease in the absence of having to commute to a job. But there’s a big difference between a 20% to 30% pay cut and a 60% pay cut.

If you retire on Social Security alone, the latter is what you might be looking at. And that could mean living a very bare-bones lifestyle when you’d rather be enjoying retirement to the fullest.

How to set yourself up for a more financially sound retirement

If you don’t want to spend the bulk of your retirement worrying about money, you’ll need income on top of Social Security. And you have different options there.

One is to save well for retirement during your working years — or play catch-up if you’re getting close to ending your career and aren’t super thrilled with your 401(k) or IRA balance. The good news is that workers over age 50 can make catch-up contributions in these accounts to help make up for lost time.

It’s also a good idea to set yourself up with investments that continue to pay you in retirement. Municipal bonds fit the bill, since they’re generally less risky than stocks by nature, and the interest they pay is always exempt from federal taxes. But it could also be a good idea to hang on to some dividend stocks in retirement for the added income.

You can also look at working part-time as a retiree for an income boost. And collecting Social Security won’t prevent you from being able to earn money from a job.

In fact, once you reach your full retirement age for Social Security purposes, you can earn any amount of money without risking having some of your benefits withheld. However, if you file for Social Security before full retirement age, you’ll be subject to an earnings-test limit.

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And if you don’t like the idea of having to take a traditional part-time job in retirement, join the gig economy instead. That could make it so you’re doing something you like on a schedule that works well for you.

Just because the average monthly Social Security benefit today is $1,920.48 doesn’t mean that’s what you’ll collect in retirement. Your monthly benefit will depend on your lifetime wages and the age at which you sign up. But no matter what your personal Social Security check looks like, it’s a good idea to plan to supplement it with outside income to avoid financial worries.

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Here’s the Average Monthly Social Security Check Today — and What Your Retirement Might Look Like if It’s Your Only Income was originally published by The Motley Fool

Boeing (NYSE: BA) is in a bad state right now. Between doors falling off airplanes, spacecraft getting stranded at space stations — and now, a strike by 33,000 machinists at the company’s core commercial aircraft business — the last thing Boeing needed was drama at the company’s defense division, which (in theory at least) is supposed to provide ballast to the business when things go awry on the commercial side.

Yet, drama is exactly what Boeing is getting.

So long, CEO

Last month, Boeing reported a revenue miss, a $2.33 per share loss, and $4.3 billion in quarterly cash burn in its second-quarter financial release. No sooner had that news come out, moreover, than Boeing dropped its next bombshell: Announcing that CEO Dave Calhoun would retire, to be replaced by former Rockwell Collins exec Robert K. “Kelly” Ortberg.

However, this was only the first management shoe to drop. Last week, in a memo circulated to Boeing staff, the new CEO announced that Boeing is also losing its head of Boeing Defense. Ted Colbert, who’s been with Boeing for 15 years, is stepping down from running the division. He will be replaced by his chief operating officer Steve Parker, who will run BDS on an interim basis.

Curiously, Boeing seems to be trying to play down the move. On the company’s various press release pages, the only news out since Sept. 20 — the day The Wall Street Journal reported on Colbert’s departure — is an announcement of the first flight of a new British E-7 Wedgetail AWACS plane (built, coincidentally, by Boeing Defense).

Nevertheless, the Journal‘s reporting seems solid. On a website run by the Securities and Exchange Commission, at least, Boeing did file a one-line update confirming that Colbert has “ceased to serve as an elected officer of The Boeing Company and as President and Chief Executive Officer of Boeing Defense, Space & Security.”

What this means for Boeing investors

This isn’t great news for investors.

On the one hand, the man primarily responsible for growing Boeing’s defense and space businesses — but who’s actually overseen stagnation at the division for the last five years — is no longer in charge. Since 2019, revenues at the BDS unit have barely budged (actually, they sank 4.5% through last year), while operating earnings flipped from a $2.6 billion profit to a $1.8 billion loss (according to data from S&P Global Market Intelligence).

So in theory, removing Colbert from leadership should be good news for Boeing investors. However, Boeing choosing Colbert’s No. 2 to take over at defense and space — even if only temporarily — doesn’t necessarily inspire confidence that things will now change for the better.

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It’s going to take more than waving a wand, or changing an office nameplate, to reverse years of Boeing decisions to bid low to win unprofitable defense contracts. And Boeing’s space business may have even more serious problems. If you recall, it was only a few months ago that NASA’s Office of Inspector General blasted Boeing for trying to build reliable spaceships when it suffers from “a lack of a sufficient number of trained and experienced aerospace workers.”

Forgive the bluntness, but these are the kinds of problems that Boeing will need years to fix.

What Boeing investors can expect next

There is one quick fix that Boeing could implement: It could sell its defense and space business, so that all of the above becomes somebody else’s problem in a single stroke. But while some industry experts have suggested this is what Boeing will do, I’m no longer so sure.

If Boeing had, for example, fired Colbert and then immediately replaced him with an exec with a mergers and acquisitions background — someone who might be relied upon to shepherd a division like BDS through a spinoff or sale — that would make sense. But firing Colbert without having a permanent replacement handpicked and ready to take over? That doesn’t sound to me like a sale is in the offing.

At this point, investors probably have to just cross their fingers and hope Boeing takes its time finding the right turnaround specialist — not an M&A specialist — to take the reins at BDS. Even once Boeing does find the right executive, investors need to be prepared to wait a while for the turnaround to take hold.

Boeing didn’t get into its present dilemma in a day. It’s going to take time — years, most likely — to repair the damage that’s been done.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Boeing’s Going, and Its Defense Boss Is Already Gone was originally published by The Motley Fool

When you think of General Dynamics (NYSE: GD), what’s the first thing that comes to mind?

Tanks, probably. Seventy-ton armored behemoths roaming across the plains.

In fact, though, while tanks are the product that General Dynamics is best known for, production of such “combat systems” is General Dynamics’ smallest business, accounting for only $8.3 billion of the more than $42 billion in sales GD makes in a year. Larger by far is General Dynamics’ “marine systems” business, which brought in $12.5 billion in revenue last year — a nearly 50% bigger business than combat systems.

Even more surprising, though, for a company best known as a defense contractor, is that not all of General Dynamics’ marine systems products are warships. While the company does specialize in the construction of nuclear-powered submarines and conventionally powered destroyers, General Dynamics also builds quite a few vessels that are more focused on keeping the U.S. Navy fueled and supplied than with actually conducting combat operations.

$6.8 billion for fuel tankers

Case in point: General Dynamics’ latest naval contract, a $6.8 billion award to build oil tankers for the Navy.

On Sept. 13, the Pentagon awarded General Dynamics a sole-source, “block buy” contract to build eight John Lewis-class fleet replenishment oilers, hull numbers T-AO 214 through 221, between now and January 2035. General Dynamics’ San Diego-based National Steel and Shipbuilding Co. (NASSCO) subsidiary will do the work and, once constructed, the vessels will enter service with the Military Sealift Command, where they will be crewed by civilian mariners.

This is a sizable contract, of course, amounting to more than half a year’s average revenues for the marine systems division. Receipt of this single contract win isn’t, however, necessarily a great reason for investors to flock to GD stock.

Caveats and provisos

Why not? Well first and foremost, consider the timeline. $6.8 billion may sound like a lot of money, but spread over 10 years through the contract’s completion, it’s actually more like $675 million per year. That’s still a nice 5% boost to average revenues for the division — but closer to a 1.6% boost for the company’s annual revenues as a whole.

In other words, probably not enough to move the needle much.

A second reason to be less than excited about this news is the fact that, while General Dynamics’ second-biggest division by revenue, marine systems is the company’s least profitable division in terms of profit margins. Last year, for example, operating profit margins at marine systems ran to just 7% according to data from S&P Global Market Intelligence, versus the 10% margins that GD earns as a whole.

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Simply put, if maximizing profits is your goal, adding revenues to General Dynamics’ marine systems division is literally the worst way to do that.

What it means for investors

Perhaps this is the reason why General Dynamics stock isn’t really up as much as you might expect on news of its winning a “$6.8 billion contract.” In the 10 days since the oiler contract was announced, in fact, GD stock has gained only about 2.6% — not much better than the 2% gain in the S&P 500 index.

In doesn’t help, of course, that General Dynamics remains a pricey stock. Valued at 24 times trailing earnings, the stock may look like a bargain in a market where the average S&P stock costs closer to 30 times earnings. However, General Dynamics’ 1.9 times price-to-sales ratio is historically expensive. From 2011 through 2020, for example, a 1.4x P/S ratio was more common. Plus, profit margins at the company have been slowly drifting lower for years, meaning those sales aren’t worth as much, in terms of profit, as they once were.

Despite its size, this latest low-margin NASSCO oiler award won’t make that trend look any better.

Should you invest $1,000 in General Dynamics right now?

Before you buy stock in General Dynamics, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and General Dynamics wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $743,952!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 23, 2024

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

General Dynamics Lands $6.75 Billion Navy Contract — And It’s Not for Warships was originally published by The Motley Fool

HONG KONG (AP) — Asian markets had a wild start to the week, with Tokyo’s Nikkei 225 index tumbling nearly 5% while Chinese markets soared on news of fresh stimulus for the faltering economy.

Japanese shares sank after the ruling Liberal Democrats chose former Defense Minister Shigeru Ishiba to succeed Prime Minister Fumio Kishida, who is due to step down on Tuesday.

Ishiba has expressed support for the Bank of Japan’s moves to raise interest rates from their near-zero level. He also backs other policies, such as possibly raising corporate taxes, that are seen as less market friendly than his chief rival for the top job, Economic Security Minister Sanae Takaichi, who he beat in a run-off vote late Friday.

The Nikkei was trading down 4.7% at 37,956.32 by midday Monday.

The dollar fell from over 146 yen to under 143 yen after the ruling party’s vote ended late Friday. By mid-Monday, it was trading at 142.49 yen, up from 142.29.

Exporters’ shares plunged, since a stronger yen is a disadvantage for Japanese companies that make a large share of their sales and profits overseas.

Toyota Motor Corp. dropped 3.5%. Honda Motor Co.’s shares fell 4.1% and Nissan Motor Co.’s declined 5.8%.

Ishiba has said he backs Kishida’s “new capitalism” policies, which ostensibly would foster more equal distribution of national wealth. But sharply rising prices have undermined progress toward encouraging consumers to spend more.

Meanwhile, the Hang Seng in Hong Kong jumped 3.3% to 21,321.97, with Hong Kong’s Hang Seng Mainland Properties Index up 8.6%. The Shanghai Composite index surged 5.7% to 3,263.59.

The rallies were auspiciously timed, coming on the eve of a week-long national holiday marking 75 years of communist rule in China. Markets in mainland China will be closed Tuesday through Oct. 7.

China is moving forward with measures announced last week to support the property industry and revive languishing financial markets. The central bank announced on Sunday that it would direct banks to cut mortgage rates for existing home loans by Oct. 31. Meanwhile, the major southern city of Guangzhou lifted all home purchase restrictions over the weekend, while both Shanghai and Shenzhen revealed plans to ease key buying curbs.

The effort to wrest the housing market out of a prolonged downturn comes as the economy shows signs of slowing further. China’s manufacturing activity in September contracted for a fifth consecutive month, as the official purchasing managers’ index came in at 49.8, remaining below the 50 line that separates expansion from contraction, according to data from the National Bureau of Statistics released on Monday.

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Elsewhere in Asia, Australia’s S&P/ASX 200 advanced 0.7% to 8,273.10. South Korea’s Kospi dropped 0.9% to 2,627.13.

On Friday, the S&P 500 edged down by 0.1% from its all-time high to 5,738.17. The Dow Jones Industrial Average rose 0.3% to 42,313.00, setting its own record, while the Nasdaq composite slipped 0.4% to 18,119.59.

Treasury yields eased in the bond market after a report showed inflation slowed in August by a bit more than economists expected. It echoed similar numbers from earlier in the month about inflation, but Friday’s report has resonance because it’s the measure that officials at the Federal Reserve prefer to use.

The Fed kept its main interest rate at a two-decade high for more than a year, in hopes of slowing the economy enough to drive inflation toward its 2% target. Now that inflation has eased substantially from its peak two summers ago, the Fed has begun cutting rates to ease conditions for the slowing job market and prevent a recession.

The risk of a downturn remains and U.S. employers have slowed their hiring. A inflation report on Friday showed growth in U.S. consumer spending in August fell shy of economists’ expectations.

In other dealings Monday, benchmark U.S. crude oil added 40 cents to $68.58 per barrel. Brent crude, the international standard, rose 45 cents at $71.99 per barrel.

The euro was trading at $1.1158, down from $1.1163.

By Ernest Scheyder

(Reuters) – Freeport-McMoRan is turbo-charging its copper output across three continents with no plans to join a buyout frenzy sweeping the mining industry, a strategy that analysts say positions the company well to capitalize on the clean energy transition’s rising demand for the red metal.

Used widely across the global economy, copper is an ideal conductor of electricity and easily malleable, qualities that have made it widely popular for use in wiring, engines, construction equipment, electronics and other devices.

Global demand is poised to jump at least 60% by 2050, according to the International Energy Agency. Analysts at Jefferies expect prices for the red metal to rise more than 40% in the next two years.

Yet new copper mines are proving difficult to develop, due in part to opposition from Indigenous groups, conservationists, local communities and others.

The difficult backdrop has pushed BHP, Rio Tinto, Glencore and other diversified miners of iron ore, nickel and other critical minerals to hunt for deals to boost their copper output even while balancing shareholders’ expectations for payouts.

Phoenix-based Freeport has long focused primarily on copper – it produces 9% of global supplies, more than any other company – and now finds itself in the rare position of being able to concentrate on expanding mines it already owns and avoiding the distraction of a buyout.

“We’re really, really focused on creating value from the assets that we have,” Kathleen Quirk, who became Freeport’s CEO in June, told Reuters ahead of the LME Week conference in London, one of the world’s largest annual gatherings of mining executives. “I don’t see Freeport as having to aggressively go out and have to overpay for things.”

Freeport expects to produce 800 million pounds (362,874 metric tons) of copper annually as soon as 2027 by leaching the metal from piles of old waste rock at its U.S. mines previously thought to be worthless.

Drones and helicopters have been installing irrigation lines atop miles-long waste piles that release an acid solution to tease out low concentrations of copper.

The leached copper will cost a third less to produce than Freeport’s hard rock mines – already some of the cheapest in the industry, according to analysts – and will not require a smelter for processing. Freeport estimates it would need to spend at least $10 billion on a new mine to mimic output from leaching.

“It’s a huge opportunity for us and one that we’re pursuing aggressively,” Quirk said.

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That leaching plan alone would produce nearly half the copper that Anglo American – which BHP tried unsuccessfully to buy earlier this year – mined across the entire globe in 2023.

‘STICK TO THEIR KNITTING’

Freeport has four other expansion projects underway that could add more than 1 billion pounds (453,592 metric tons) of copper annually to its production in coming years, including more than 500 million pounds (226,796 metric tons) annually by 2025 in the United States.

Another is in Indonesia, where it is expanding Grasberg, the world’s second-largest copper mine. Freeport is also hoping to negotiate an extension of its mining rights beyond 2041 with the new Indonesian president, who takes office next month.

The company is preparing its application now to extend the license and Chairman Richard Adkerson – who led the last round of negotiations when he was CEO – plans to join the discussions, Quirk said.

“Indonesia is part of the fabric of our company as we’ve been working hard to improve the livelihood of the people, provide benefits to the government, all while providing returns on investments for our shareholders,” she said. “I want to continue that positive relationship.”

In Chile, Quirk said the regulatory climate has improved under President Gabriel Boric after a period of uncertainty fueled by an unsuccessful attempt to change the country’s constitution last year.

“Chile is a more stable environment for investors now,” said Quirk. An application to expand the El Abra mine, which counts state-owned Codelco as a minority partner, should by filed next year, she said.

Freeport’s stock has risen 30% the past year as investors have warmed to the company’s plans to expand existing operations. Seventeen of the 24 analysts that track Freeport’s stock recommend buying it and none recommend selling, according to LSEG Workspace.

“Freeport is a workhorse in my portfolio,” said Derek Bone of the Optica Rare Earths & Critical Materials ETF, which holds shares of Freeport. “I want them to stick to their knitting.”

Quirk, who had been Adkerson’s deputy for more than 20 years, is facing a challenge recruiting workers in the United States, where the company has moved as a result to deploy autonomous trucks.

“I’m hoping that with everybody focused on our future economy and how it will require more use of metals, we’ll get the best and brightest into our industry to help us,” said Quirk.

That is top of mind for Freeport’s customers, who are gobbling up more copper.

Nvidia, for example, said in March it would use copper cables for AI data centers – rather than fiber optic cables.

“That bodes well for copper demand over the longer term,” said Steve Schoffstall of the Sprott Energy Transition Materials ETF, which holds Freeport shares. “Companies like Freeport are in a good spot.”

(Reporting by Ernest Scheyder; Editing by Veronica Brown and Marguerita Choy)

(Bloomberg) — US stocks will outperform the nation’s government and corporate bonds for the rest of this year as the Federal Reserve keeps cutting interest rates, the latest Bloomberg Markets Live Pulse survey shows.

Most Read from Bloomberg

Exactly 60% of the 499 respondents said they expect US equities will deliver the best returns in the fourth quarter. Outside of the US, 59% said they prefer emerging markets to developed ones. And as they ramp up these bets, they’re avoiding traditional ports of calm, such as Treasuries, the dollar and gold.

It’s a risk-on view that dovetails with bullish calls emerging on Wall Street following the Fed’s half-point rate cut this month. China’s biggest stock rally since 2008 after Xi Jinping’s government ramped up economic stimulus also helped boost the bullish attitude.

“The biggest challenge that the US economy has been facing is actually high short-term interest rates,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “We’d already been leaning into risk assets and leaning into US equity,” he said, and “if there were a pullback, we would consider even adding to that.”

The Fed slashed its benchmark rate from the highest level in two decades on Sept. 18, and the median official forecast projected an additional half-point of easing across the two remaining 2024 meetings, in November and December.

‘Room to Cut’

The MLIV Pulse survey showed that 59% expect the Fed to deliver quarter-point cuts at each of those two gatherings. Thirty-four percent anticipate steeper reductions in that period, totaling three-quarters of a point or a full point. That’s more in line with swaps traders, who are pricing in a total of around three-quarters of a point of cuts by year-end.

Investor confidence that the Fed can engineer a soft landing has grown, putting the S&P 500 Index on track to gain in September — historically the gauge’s worst month of the year — for the first time since 2019.

“The Fed has a lot of room to cut as do many other central banks,” said Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management. “That sets up a good backdrop for the economy in the US, in particular. That doesn’t erase the tightness of valuations, but makes them more justifiable.”

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When asked which trade is best to avoid for the rest of the year, 36% — the biggest group — cited buying oil. Crude has slumped because of concern that rising production outside of the OPEC+ alliance will create an oversupply next year. The runner-up was buying Treasuries, with 29%.

Treasuries are still on course to gain for the fifth straight month. And while rate cuts can buoy bonds, there are plenty of questions about fixed income given diverging views around how quickly the central bank will drop borrowing costs, with the job market proving resilient. Investors are particularly wary of long-term Treasuries, given the risk that inflation could heat up again as the Fed eases.

What Bloomberg strategists say …

“Term premium of longer-dated Treasuries is set to rise, while liquidity risks — already heightened as the government runs persistently large fiscal deficits — is likely to deteriorate.”

– Simon White, Macro Strategist on MLIV

The survey also showed limited enthusiasm for the US dollar, another traditional haven asset. Eighty percent of respondents expect the greenback to end the year either roughly flat or down more than 1%. The Bloomberg Dollar Spot Index is up less than 1% year-to-date.

The MLIV Pulse survey was conducted Sept. 23-27 among Bloomberg News terminal and online readers worldwide who chose to engage with the survey, and included portfolio managers, economists and retail investors. This week, the survey asks if the worst is over for commercial real estate debt. Share your views here.

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