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There are pockets of the market that can give investors growth opportunities that don’t have to be related to the tech sector or the artificial intelligence (AI) trend. Dutch Bros (NYSE: BROS) is proof of that.

But shares have been a disappointment in recent years. They have lost about 13% of their value since the initial public offering in September 2021. Some people might view this as a good opportunity to make a move.

Should you buy this mid-cap stock while it trades well below $40 per share? Here’s what investors need to know.

Dutch Bros is in growth mode

Dutch Bros is probably a top choice for investors seeking growth potential in the restaurant sector. The company reported a revenue jump of 30% in the second quarter (ended June 30). This was partly driven by same-store sales growth of 4.1%, which is healthy given the uncertainty across the economy.

Another big part of Dutch Bros’ strategy is to expand the physical footprint. After 30 new locations opened in the last three months, there are now 671 stores in the U.S. Executives have explicitly stated that the target is to get to 4,000 locations in the next 10 to 15 years.

When companies are fully focused on expansion, as is the case here, there are typically no profits being reported. Here’s where Dutch Bros bucks the trend. Net income soared roughly 130% from $9.7 million in Q2 2023 to $22.2 million in the latest quarter. Expenses are rising at a slower rate than the top line, a positive trend.

According to Wall Street consensus analyst estimates, the business is projected to increase sales and earnings per share at compound annual rates of 22.3% and 25.3%, respectively, between 2023 and 2026. This is a robust outlook.

Valuation and quality

As of this writing, shares trade 58% below their peak, which was established during the last rising market environment in late 2021. Investor sentiment has cooled down considerably since that record was reached. But the stock still looks extremely expensive at a price-to-earnings ratio of 127.

For some investors, though, this might not matter. The bulls believe that Dutch Bros can one day get to its target of 4,000 stores. To be clear, these are the only people who should buy the stock. That’s because the current valuation likely bakes in that this favorable outcome is more likely than not to occur. And if the business does hit that goal, revenue and earnings will surely be much higher than they are today.

I’m not as confident. In fact, I believe that Dutch Bros still has a lot to prove before it’s worthy of investment consideration.

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One reason I feel this way is because I don’t think the business possesses an economic moat. Despite its recent struggles, Starbucks clearly dominates this industry. Over the decades, it has developed durable competitive strengths that stem from its powerful brand recognition, as well as cost advantages.

Dutch Bros doesn’t hold a candle to Starbucks’ long-running relevance. And with the latter having a store base that’s about 25 times the size of the former’s footprint just in the U.S., Dutch Bros has a lot of work to do before it can even be mentioned in the same breath as the market leader.

Investors always fall in love with a good growth story. But the reality is that strong growth doesn’t last forever. In Dutch Bros’ case, there’s downside should the gains slow down, something that wouldn’t surprise me if it happened. The retail coffee industry is one of the most competitive around, with no barriers to entry or switching costs.

Even at a price below $40 per share, investors should stay away from Dutch Bros.

Should you invest $1,000 in Dutch Bros right now?

Before you buy stock in Dutch Bros, 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 Dutch Bros 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 $731,449!*

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*Stock Advisor returns as of August 26, 2024

Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.

Should You Buy Dutch Bros Stock While It’s Below $40? was originally published by The Motley Fool

Bank stocks are an appealing option for many investors because they tend to offer appealing dividends as well as solid long-term returns. I say “tend to offer” because not all bank stocks are created equal nor do all bank stocks perform well.

If you’re looking for the best bank stock ideas right now, the two picks featured below have real potential. And the second pick might just surprise you.

1. TD Bank: This stock has a proven history of profitability

When it comes to making money with bank stocks, Toronto-Dominion Bank (NYSE: TD) is a prime case study. Over the last 30 years, shares of TD Bank (as it is more commonly known) have posted an incredible total return (including dividends reinvested) of 3,140%. The S&P 500‘s total return was 1,340% over the same time period.

What made TD Bank’s rise so spectacular? It’s partially due to the unique operating conditions of Canada’s banking sector, where regulations encourage industry consolidation. For example, TD Bank is currently the second-largest bank in Canada, with $1.4 trillion in assets. The second-largest bank in the U.S. is Bank of America, which has assets of $3.3 billion despite the U.S. banking industry being many times larger than Canada’s. Outsized market share has allowed TD Bank to post profits and returns on equity that its U.S. counterparts can’t quite match. TD Bank’s average annual return on equity over the past five years, for instance, has been roughly 13.2%. Bank of America, for comparison, has averaged just 9.7%.

To be fair, TD Bank’s performance in more recent years hasn’t matched its historical average. Over the last three years, shares have delivered a total return of just 2% versus a total return for the S&P 500 of 30%. That underperformance is reflective of struggles in the banking sector as a whole. Bank of America shares, for instance, rose by just 0.8% over the same time period. It’s also related to some U.S. regulatory issues from 2023 involving the bank’s money-laundering controls that TD Bank is working to resolve. Until they are resolved, TD’s growth could be somewhat slowed.

Investors could use this underperformance to their advantage. TD Bank currently trades at just 1.4 times book value, a discount versus its three-year average of 1.6 times book value. The dividend yield, too, recently hit new highs and now tops 5%. If you’re looking for a bank stock with good value and a solid dividend that is well covered, TD Bank is for you.

2. Berkshire Hathaway: A secret way to bet on the best bank stocks

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) isn’t a bank stock, but it owns stakes in enough bank stocks to qualify for consideration. For decades, CEO Warren Buffett has made Berkshire a big investor in a variety of banks. Right now, Berkshire’s portfolio is betting tens of billions of dollars on well-known banks like Capital One, Citigroup, and Bank of America, as well as lesser-known banks like Ally Financial and Nu Holdings. In total, Berkshire’s portfolio has more than $40 billion invested directly in bank stocks, with another $43 billion bet on financial services companies like Mastercard, American Express, and Visa. Berkshire is more of a bank stock than many realize.

Of course, buying Berkshire shares also exposes you to a wide variety of other businesses, and your direct exposure to banks will be relatively small. But the upside is that you get to outsource your bank stock picks to one of the best investors of all time: Warren Buffett. Buffett has outlined his strategy for investing in bank stocks before.

“It’s a business that can be a very good business, when run right,” he told investors in 1996. “There’s no magic to it. You just have to stay away from doing something foolish.” With Buffett managing your bank stock portfolio, you’re much less likely to invest in a bank stock bust.

Despite the holding company recently topping $1 trillion in market cap for the first time, Berkshire Hathaway’s valuation is highly reasonable, especially considering the quality of the conglomerate. Shares trade just shy of 1.7 times book value, a figure that is likely overstated due to massive share buybacks, which grow shareholder value but tend to depress accounting book value.

It’s a strange pick as a bank stock, but Berkshire could be a great fit for those looking to add banking sector exposure while diversifying much of the risk.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, 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 Berkshire Hathaway 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 $731,449!*

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 August 26, 2024

Ally is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends Nu Holdings and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

The Smartest Bank Stocks to Buy With $500 Right Now was originally published by The Motley Fool

(Bloomberg) — Upcoming readouts on the US labor market, including the monthly payrolls report, will give Federal Reserve policymakers insight into the need for further interest-rate reductions after an all-but-certain cut in a little more than two weeks.

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With inflation slowing — although still running faster than the Fed’s goal — Chair Jerome Powell has telegraphed a September rate cut and said that officials “do not seek or welcome” further cooling in the labor market. Weeks earlier, government figures showed lower-than-expected July job growth and the highest unemployment rate in nearly three years.

This coming Friday, the August jobs report is expected to show payrolls in the world’s largest economy increased by about 165,000, based on the median estimate in a Bloomberg survey of economists.

While above the modest 114,000 gain in July, average payrolls growth over the most recent three months would ease to a little more than 150,000 — the smallest since the start of 2021. The jobless rate probably edged down in August, to 4.2% from 4.3%.

Two days before Friday’s report, the government will issue figures on July job vacancies. The number of open positions, a measure of labor demand, is seen easing to a three-month low of 8.1 million — just above a more than three-year low.

The number of vacancies per unemployed worker, a ratio the Fed watches closely, currently stands at 1.2, similar to pre-pandemic levels and a sign labor demand is roughly in line with supply. At its peak in 2022, the ratio was 2 to 1.

Also included in the job openings report are data on lay-offs and discharges. Any large increase could add to Fed officials’ concerns about a weakening labor market.

Other labor-related reports in the upcoming holiday-shortened week include weekly jobless claims and ADP Research Institute’s August snapshot of private payrolls. In addition, the Fed will issue its Beige Book of regional economic conditions, while the Institute for Supply Management reports purchasing managers indexes for manufacturing and services.

What Bloomberg Economics Says:

“Non-farm payrolls will likely improve from July’s disappointing reading – but the 818k downward revision in the BLS’s early estimate for the March 2024 benchmark period probably leaves Fed officials less willing to take the initial prints at face value.”

— Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists. For full analysis, click here

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Elsewhere, the Bank of Canada is widely expected to deliver a third straight rate cut, as inflation that’s been within its target range all year allows officials to shift focus to weakness in the job market.

Purchasing manager indexes from around Asia, German industrial numbers and gross domestic product from Brazil are among other highlights.

Click here for what happened in the past week, and below is our wrap of what’s coming up in the global economy.

Asia

Asia begins the week with a wave of August manufacturing PMI data – including from Indonesia, South Korea, Malaysia, Thailand, Taiwan and the Philippines – following on from China’s official figures at the weekend.

China’s Caixin manufacturing PMI is also out on Monday, and is expected to show a return to expansion after a dip below 50 in July.

Japan on Monday gets a report on corporate performance in the second quarter. Capital investment may recover a tad after slipping in the three months through March, data that will feed into revised economic growth figures the following week.

In Australia, attention falls on current account figures that will also likely affect gross domestic product data. Those figures, due Wednesday, are expected to show that economic growth accelerated slightly from the prior quarter.

South Korea revises its second-quarter GDP the following day, and the region also gets a flurry of inflation updates. Trade data for August — published Sunday — showed that export growth returned to a double-digit clip, an outcome that bodes well for the economic outlook and reflects the resilience of global demand for technology products.

Vietnam’s consumer price gains may slow below 4% for the first time since March, while consumer-price data are also due from South Korea, Thailand, Taiwan, Indonesia and the Philippines. Trade statistics will be published in Australia, Vietnam and Pakistan.

Among central banks, Malaysia sets its overnight policy rate on Thursday and Reserve Bank of Australia Governor Michele Bullock delivers a speech the same day.

Europe, Middle East, Africa

Euro-zone policymakers have until the close of play on Wednesday to make comments before a blackout period kicks in ahead of their Sept. 12 decision.

With inflation now at a three-year low, a second rate cut for the newly-minted easing cycle looks increasingly likely. Central bank chiefs from Germany and France are among those scheduled for appearances.

The calendar for data is relatively light, with Germany likely to be a highlight. Factory orders on Wednesday and industrial production the following day will reveal the state of the country’s struggling manufacturers at the start of the third quarter.

Among regional reports on the agenda, a second reading of the euro-zone’s GDP measurement for the three months through June will be released.

The UK is likely to be similarly quiet, with final takes on August purchasing manager indexes for manufacturing and services scheduled for Monday and Wednesday respectively.

Consumer-price data in Switzerland may draw eyeballs in advance of the Swiss National Bank’s rate decision later this month. Inflation may stick at 1.3% for a third month, comfortably below the 2% ceiling for policymakers.

Turning east, in Poland — where data on Aug. 30 showed the fastest inflation so far this year — the central bank is widely expected to keep its key rate unchanged at 5.75% on Wednesday. Governor Adam Glapinski will speak at a news conference the following day.

Data from South Africa on Tuesday will likely show that the continent’s most industrialized economy skirted recession. Analysts expect the economy to have grown 0.5% in the second quarter after contracting 0.1% in the prior three months, helped by improved power supplies.

In Turkey, data is expected to show the inflation rate dropped by about 10 percentage points in August, to 52% from 62%. The central bank is hoping it declines to about 40% by year-end.

From Wednesday to Friday, African heads of and Chinese President Xi Jinping will gather in Beijing for the Forum on China–Africa Cooperation, where they’re expected to discuss new investment opportunities.

On Thursday, Egypt’s central bank is widely expected to hold its main rate at 27.5%. Some analysts, though, think it may opt to start the easing process now given the steady retreat in price pressures over the past year.

Latin America

Brazil on Tuesday will report second-quarter economic growth figures likely to reinforce that demand is shaking off the effects of tight monetary policy.

GDP is expected to have risen 0.9% quarter-on-quarter, more than during the first three months of the year, as a tight labor market and strong consumption propel activity.

The release will likely boost leftist President Luiz Inacio Lula da Silva, who’s raised public spending while pledging to improve living standards for ordinary citizens in Latin America’s largest economy. It could further pressure the central bank for interest rate increases as soon as in September.

The coming week will be crucial for economic data releases in Chile. On Tuesday, the nation’s central bank is likely to cut its key rate by a quarter-point, to 5.5%, after having paused the easing cycle at its prior meeting.

The next day, Chilean central bankers will publish their quarterly monetary policy report, with updated estimates on economic growth, inflation, and the future path for borrowing costs.

On Friday, the government will report August consumer price data, which is expected to show inflation accelerating further above the 3% target due to a series of electricity tariff hikes.

–With assistance from Matthew Malinowski, Piotr Skolimowski, Laura Dhillon Kane, Brian Fowler and Monique Vanek.

(Updates with South Korea trade in Asia section)

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©2024 Bloomberg L.P.

(Bloomberg) — Hong Kong’s property downturn is taking a growing toll on New World Development Co., the firm owned by the billionaire Cheng family.

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The company said late on Friday it expects to post a loss of as much as HK$20 billion ($2.6 billion) for the financial year ended in June — its first annual loss in two decades. Its share price plunged 13% on Monday to the lowest level since 1986, when Bloomberg started tracking the data.

New World has been grappling with higher debt levels than its peers — adding pressure on 44-year-old Chief Executive Officer Adrian Cheng, the third generation to oversee the business, to turn things around.

The developer cited asset impairment, losses on investments and higher interest rates for the decline. A revaluation of the group’s investment and development properties including a goodwill assessment will lead to a non-cash loss of HK$8.5 billion to HK$9.5 billion, the company said. Meanwhile, core operating profit is expected to drop as much as 23%.

New World’s 5.25% perpetual dollar bond fell 3.2 cents to 83.6 cents on the dollar Monday, the largest drop in a day since September 2023, according to Bloomberg-compiled prices.

The sizable asset writedowns “could raise its leverage ratio and hurt the developer’s deleveraging plan,” said Patrick Wong, a real estate analyst at Bloomberg Intelligence. “This could also raise investors’ concerns about potential risk of further valuation decline of its investment properties particularly Hong Kong office buildings.”

The company said in an email that the writedown was a proactive move to position the company “for the upcoming interest rate cut cycle where the overall property market is expected to rebound.”

The developer has been under scrutiny in recent years over its high level of borrowings. Net debt to equity was 82.7% as of the end of last year, compared with 41.4% at rival Henderson Land Development Co. and 21.2% at Sun Hung Kai Properties Ltd., according to BI.

New World’s writedown reflects a broader problem among developers. Hong Kong’s residential prices have plummeted to an eight-year low. Office and retail sectors remain weak, reducing rental income and hence the value of developers’ investment properties.

The city’s most prestigious office towers have seen value decline significantly in the past few years. CK Asset Holdings Ltd.’s landmark Cheung Kong Center, for instance, lost one-third of its rental value over the four years ending in 2023.

Story continues

The lackluster residential market also limits New World’s potential income from selling apartments. It’s putting pressure on developers to discount their projects in order to lure buyers. New World priced a new project in the middle-class neighborhood of Kai Tak In July at the cheapest level for the district since 2016.

New World’s situation is “severe” and the company needs to sell assets, according to Sam Wong, an equity analyst at Jefferies LLC. “They also have to consider whether they have to be more realistic” in terms of pricing, he added.

Despite the headwinds, Cheng has been ramping up efforts to improve the firm’s financial situation. The company recently completed more than HK$16 billion in loan arrangements and debt repayments in July and August, including early refinancing of some loans due in 2025. The company said in the email that it has completed more than HK$50 billion of debt arrangements and repayments this year.

New World is also offloading lower-tier assets to raise cash, and said in February it was planning to dispose HK$8 billion of non-core assets for the fiscal year ended in June 2024.

New World’s profit warning coincided with executive appointments on the same night at the Chengs’ private investment vehicle, putting the family’s succession plan back into the spotlight. The clan announced that one of Adrian’s brothers had been appointed as co-CEO at Chow Tai Fook Enterprises Ltd., taking charge of the North Asia region for the family’s deep-pocketed investment firm. That means four of the siblings now each effectively controls a key part of the family business.

–With assistance from Shirley Zhao, Lorretta Chen and Shikhar Balwani.

(Updates with share, bond price change and an analyst quote.)

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©2024 Bloomberg L.P.

Today’s savings account interest rates are some of the highest we’ve seen in more than a decade due to several rate hikes by the Federal Reserve. Even so, savings interest rates vary widely by bank, so it’s important to be sure you’re getting the best rate possible when shopping around for a savings account. The following is a breakdown of savings interest rates today and where to find the best offers.

Overview of savings interest rates today

The national average savings account rate stands at 0.46%, according to the FDIC. This might not seem like much, but consider that just two years ago, it was just 0.07%, reflecting a sharp rise in a short period of time.

This is largely due to monetary policy decisions by the Fed, which began raising its benchmark rate in March 2022 to combat skyrocketing inflation. Since then, the Fed increased rates 11 times, though it paused further rate hikes in 2024. Experts believe the Fed will eventually begin to lower its target rate in September, which means deposit account rates, including savings interest rates, will likely begin to fall.

Although the national average savings interest rate is fairly low compared to other types of accounts (such as CDs) and investments, the best savings rates on the market today are much higher. In fact, some of the top accounts are currently offering upwards of 5% APY.

Poppy Bank, for instance, is currently offering the highest savings account rate today at 5.50% APY for its Premier Online savings account. The minimum opening deposit is $1,000 and this rate is guaranteed for three months.

Betterment also offers an account with 5.50% APY. However, this is a cash management account for brokerage customers and not a traditional savings account. There is no minimum opening deposit required.

Since these rates may not be around much longer, consider opening a high-yield savings account now to take advantage of today’s high rates.

Here is a look at some of the best savings rates available today from our verified partners:

Related: 10 best high-yield savings accounts today>>

How much interest can I earn with a savings account?

The amount of interest you can earn from a savings account depends on the annual percentage rate (APY). This is a measure of your total earnings after one year when considering the base interest rate and how often interest compounds (savings account interest typically compounds daily).

Say you put $1,000 in a savings account at the average interest rate of 0.45% with daily compounding. At the end of one year, your balance would grow to $1,004.51 — your initial $1,000 deposit, plus just $4.51 in interest.

Now let’s say you choose a high-yield savings account that offers 5% APY instead. In this case, your balance would grow to $1,051.27 over the same period, which includes $51.27 in interest.

The more you deposit in a savings account, the more you stand to earn. If we took our same example of a high-yield savings account at 5% APY, but deposit $10,000, your total balance after one year would be $10,512.67, meaning you’d earn $512.67 in interest. ​​

Read more: What is a good savings account rate?

(Bloomberg) — Global equities began September on the back foot as investors prepared for what’s typically considered the most challenging month for stocks.

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Europe’s Stoxx 600 fell 0.2% from Friday’s record high, with the automotive and consumer goods sectors particularly affected. This downturn followed data showing a fourth consecutive month of contraction in Chinese manufacturing activity, alongside a deepening slump in the country’s residential property market.

Similarly, mining giants such as Rio Tinto Plc and BHP Group Ltd. saw declines after iron ore prices dropped. In London, Rightmove Plc surged more than 20% after Rupert Murdoch’s REA Group Ltd. said it’s exploring a possible cash and share offer.

US equity futures softened after the S&P 500 came close to an all-time high on Friday. The dollar was steady, while cash Treasuries were closed for the US Labor Day holiday.

September has been a notably poor month for stocks over the past four years, while the dollar typically outperforms, according to data compiled by Bloomberg. Wall Street’s fear gauge – the Cboe Volatility Index, or VIX – has risen each September since 2021.

The trend may continue, especially with the upcoming US jobs report on Friday, serving as a guide to how quick, or slow, the Federal Reserve will cut rates and as the US election campaign gets into full swing. Traders are pricing the US easing cycle will begin this month, with a roughly one-in-four chance of a 50 basis-point cut, according to data compiled by Bloomberg.

“I think the market is pretty well versed with what it thinks is going to happen — there will be some kind of cut,” Fiona Boal, global head of equities at S&P Dow Jones Indices, told Bloomberg Television. “As we move through autumn, we will see the VIX move more to thinking about the markets, thinking about political issues.”

Two days before Friday’s report, the government will issue figures on July job vacancies. The number of open positions, a measure of labor demand, is seen easing to a three-month low of 8.1 million — just above a more than three-year low.

The equity-market rally may stall even if the Federal Reserve starts its rate-cutting cycle, according to JPMorgan Chase & Co. strategists.

Any policy easing would be in response to slowing growth, while the seasonal trend for September would be another impediment, the team led by Mislav Matejka wrote in a note.

Story continues

“We are not out of the woods yet,” Matejka said, reiterating his preference for defensive sectors against the backdrop of a pullback in bond yields. “Sentiment and positioning indicators look far from attractive, political and geopolitical uncertainty is elevated, and seasonals are more challenging.”

Elsewhere, German Chancellor Olaf Scholz’s ruling coalition was punished in two regional elections on Sunday, with the far right clinching its first triumph in a state ballot since World War II. Still, political parties moved to block the Alternative for Germany from power in the eastern states of Thuringia and Saxony.

China Woes

In Asian markets, multiple rounds of stimulus have failed to revive growth in China, where a prolonged property market slump is curbing domestic demand in the world’s second-largest economy.

“I think there’s a huge problem — by now everybody recognizes that,” Hao Ong, chief economist at Grow Investment Group, told Bloomberg’s David Ingles and Yvonne Man in an interview. “The government needs to do substantially more.”

In commodities, oil steadied as traders weigh a planned production increase from OPEC+ next month against currently lower output in Libya, while staying mindful of economic headwinds in China.

Key events this week:

• US markets closed for Labor Day holiday, Monday

• South Korea CPI, Tuesday

• Switzerland GDP, CPI, Tuesday

• South Africa GDP, Tuesday

• US construction spending, ISM Manufacturing index, Tuesday

• Mexico unemployment, Tuesday

• Brazil GDP, Tuesday

• Chile rate decision, Tuesday

• Australia GDP, Wednesday

• China Caixin services PMI, Wednesday

• Bloomberg CEO Forum in Jakarta, Wednesday

• Eurozone HCOB services PMI, PPI, Wednesday

• Poland rate decision, Wednesday

• Fed’s Beige Book, Wednesday

• Canada rate decision, Wednesday

• South Korea GDP, Thursday

• Malaysia rate decision, Thursday

• Philippines CPI, Thursday

• Taiwan CPI, Thursday

• Thailand CPI, Thursday

• Eurozone retail sales, Thursday

• Germany factory orders, Thursday

• US initial jobless claims, ADP employment, ISM services index, Thursday

• Eurozone GDP, Friday

• US nonfarm payrolls, Friday

• Canada unemployment, Friday

• Chile CPI, Friday

• Colombia CPI, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 8:08 a.m. New York time

• Nasdaq 100 futures were little changed

• Futures on the Dow Jones Industrial Average fell 0.1%

• The Stoxx Europe 600 fell 0.2%

• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.1% to $1.1063

• The British pound was little changed at $1.3135

• The Japanese yen fell 0.5% to 146.96 per dollar

Cryptocurrencies

• Bitcoin rose 0.1% to $58,486.53

• Ether rose 0.7% to $2,520.17

Bonds

• The yield on 10-year Treasuries was little changed at 3.90%

• Germany’s 10-year yield advanced three basis points to 2.33%

• Britain’s 10-year yield advanced four basis points to 4.05%

Commodities

• West Texas Intermediate crude fell 0.1% to $73.47 a barrel

• Spot gold fell 0.1% to $2,500.86 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Catherine Bosley and Sagarika Jaisinghani.

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©2024 Bloomberg L.P.

Economy

The relationship between the party affiliations of the U.S. presidents and economic growth has been a topic of extensive research and debate. Historically, some studies have suggested a correlation between the party in power and economic performance. For instance, data from the post-World War II era often shows that the U.S. economy has grown faster under Democratic presidents than Republican presidents. However, this correlation does not necessarily imply causation.

Kar Yong Ang, the Octa analyst, said: ‘Economic growth is a function of numerous variables, including global economic conditions, technological advancements, fiscal and monetary policies, and unforeseen events like natural disasters or pandemics. Therefore, attributing economic performance solely to the president’s party affiliation can be overly simplistic and potentially misleading.’

Indeed, the legislative branch also plays a crucial role in shaping economic policy. A president’s ability to implement their economic agenda often depends on the composition of Congress. For example, a president facing a divided government may struggle to pass significant economic reforms, regardless of party affiliation.

Still, there is widespread belief that Democratic administrations tend to focus more on fiscal stimulus and social welfare programs, which can boost consumer spending and economic growth in the short term. On the other hand, Republican administrations often emphasize tax cuts and deregulation, which can stimulate business investment and long-term economic growth.

The U.S. Key macro indicators under four presidents (2004–2024)

Source: Octa

At the same time, both bad and good events happen, regardless of who is in the White House. ‘Quite frankly, sometimes it’s just pure luck that defines Presidents’ track record on the economy. For example, Obama entered the White House when the U.S. economy was just about to start recovering following the great financial crisis of 2007–2008, whereas Trump may be said to be less fortunate as he faced the unprecedented Covid crisis during the final year of his presidency’, says Kar Yong Ang, Octa’s analyst. Overall, judging by historical macro indicators, there is no definite conclusion to make about which President is better for the economy.

U.S. Stocks

The U.S. stocks tend to experience increased volatility in the months leading up to an election. This is largely due to the uncertainty surrounding potential policy changes that could affect international trade, economic growth, and geopolitical stability. Therefore, market participants often engage in ‘wait-and-see’ behaviour, holding off on major investment decisions until the election outcome is clear. Historically, the stock market tends to perform better in the year following an election, particularly if the incumbent party wins, as this suggests policy continuity.

While elections can certainly stir immediate reactions, historical data reveals that their long-term impact on financial markets tends to be limited. Market performance over the medium to long term is more often influenced by broader economic parameters like inflation trends rather than who wins the election.

Dow Jones Industrial Average (DJIA) performance under four presidents (2004–2024)

Source: Octa

Historically, sectors like healthcare, energy, technology, and finance react differently to election results due to their sensitivity to legislative changes. The 2016 U.S. election serves as a notable example of markets reacting strongly to the election results, anticipating tax cuts and regulatory reforms that boosted market sentiment.

U.S. Dollar

Both domestic and international perceptions of the candidates’ economic policies influence the U.S. dollar’s performance during the election years. A candidate perceived as fiscally conservative might strengthen the dollar due to expectations of reduced government spending and lower inflation. Conversely, a candidate favouring expansive fiscal policies could lead to a weaker dollar due to concerns over increased debt.

Trade policies are another crucial factor. A candidate with a protectionist stance might introduce tariffs or renegotiate trade deals, which can affect the dollar’s value. Protectionist policies can lead to a stronger dollar in the short term due to reduced imports, but they might also result in retaliatory measures from trade partners, which could weaken the dollar in the long run.

Geopolitical stability and foreign relations are additional aspects that can affect the dollar during the election periods. A candidate perceived as more stable and predictable in foreign policy might boost the investors’ confidence, leading to a stronger dollar. On the other hand, a candidate whose policies are seen as potentially destabilizing could lead to a weaker dollar as investors seek alternative assets.

The U.S Dollar Index (DXY) performance under four presidents (2004–2024)

Source: Octa

Over the past 20 years, the U.S. Dollar Index (DXY) has performed better under Democratic Presidents and had negative returns under Republican leadership. However, as with the U.S. stock indices, it’s crucial not to oversimplify this trend. The U.S. dollar is a global reserve currency influenced by a myriad of factors beyond just presidential policies.

Gold

Gold, considered a safe-haven asset, typically sees increased demand during election periods marked by uncertainty. Historical data indicates that on a micro level, gold prices tend to rise in the months leading up to an election and may continue to do so if the election results are contested or lead to significant policy shifts.

However, Kar Yong Ang, an Octa analyst, notes: ‘If we look at the bigger picture, we see that gold price just generally tends to increase in the long-term and the ideological stance of an incumbent U.S. President has very little or no impact on its performance’. Indeed, the value of gold almost doubled during President Obama’s first term in office but experienced a 30% decline during his second term.

The U.S Dollar Index (DXY) performance under four residents (2004–2024)

Source: Octa

According to a study by the World Gold Council (WGC), gold typically performs slightly better in the six months leading up to a Republican president’s election and stays flat afterwards. On the other hand, it tends to underperform before a Democratic president’s election and performs just below its long-term average in the six months post-election period.^[1] However, WGC admits that these results are statistically insignificant and that gold is responding not to the party affiliation of an elected President but, more likely, to the expected effect of specific policies.

About Octa

Octa is an international broker that has been providing online trading services worldwide since 2011.

1. https://www.gold.org/goldhub/research/ballots-bullion-examining-us-elections-effect-gold ↑

This article was originally posted on FX Empire

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