Meet Alessandro →
Weekly note

How Do Smart Investors Thrive in Uncertain Markets?

Dear Investors,

In today’s world, markets can feel like a rollercoaster ride – ups and downs, twists and turns. But what if, instead of fearing the drops, you learned to enjoy the ride?

The truth is, smart investors know that with the right strategy, market volatility isn’t something to be afraid of. In fact, it can create big opportunities. Let’s dive into how you can navigate these market waves and come out on top.

The market today: what’s happening?

Right now, the stock market is doing something interesting. Despite all the global uncertainties, the S&P 500 has posted its best quarterly growth since the end of 2021. Companies are making more money than expected, and in the second quarter of 2024 alone, earnings-per-share (EPS) jumped by 11.4%. That’s impressive! Even though the market tends to wobble in September – losing about 4.2% on average over the last five years – things are looking up.

The big question everyone is asking: Will this optimism continue? Experts believe it might, with predictions of 10.1% earnings growth for the whole year of 2024. While this is great news, investors still need to be cautious. Elections, international tensions, and other factors can stir the market at any moment.

Using volatility to your advantage

Why volatility isn’t so scary

Market swings can seem frightening, but here’s a secret: if you’re a long-term investor, they can work in your favor. Historically, markets have a pattern of bouncing back. For example, when the U.S. Federal Reserve cuts interest rates (which they’re planning to do), stocks often get a boost. In fact, after the first rate cut of a cycle, the S&P 500 has typically risen by 17% within the next year.

So, rather than panicking when the market drops, it’s important to remember the bigger picture. Short-term losses can quickly turn into long-term gains if you hold steady.

What the federal reserve is doing – and why it matters

Interest rates and the market

The Federal Reserve is likely to cut interest rates by 100 basis points (1%) by the end of the year. Why does this matter? Well, lower rates mean it’s cheaper for people and businesses to borrow money. When borrowing becomes easier, spending usually picks up, and that’s good for the economy – and for the stock market.

But there’s a flip side. Some experts say the market may already be expecting these rate cuts, so there might not be a massive surge when they happen. That’s why it’s important to keep a balanced approach and not put all your eggs in one basket.

Earnings are strong – here’s what it means for you

Why corporate earnings matter

Corporate earnings – the money companies make – are a big deal for investors. In the second quarter of 2024, the S&P 500 companies posted solid profits. Companies outside the tech giants (the “Magnificent 7”) saw earnings grow by 6.5%, marking the first positive growth in over a year. And for the full year 2024, earnings are expected to rise by 10.1%. This is a great sign that the overall market is healthy.

What’s even more important is that earnings growth isn’t just coming from tech companies. Sectors like healthcare, utilities, and financials are also seeing solid profits. This shows that the market recovery is widespread, which is a positive sign for investors.

How geopolitics is shaking things up

Politics and the market

There’s no way around it – politics can shake up the stock market. The U.S. election, conflicts overseas, and even trade tensions with China can all cause sudden market shifts. Historically, the market tends to dip one or two months before a U.S. election, but the good news is it usually rebounds afterward, no matter who wins. After the 2020 election, for instance, the S&P 500 jumped by 15% in the following year.

While politics are hard to predict, it’s a good reminder to stay focused on your long-term goals and not get thrown off by short-term noise.

Where should you be investing?

Opportunities in different markets

Even with all the global uncertainty, there are still great opportunities out there. U.S. stocks, for example, tend to do well during economic slowdowns. In 2024, the MSCI World Index (which tracks stocks around the globe) has already gained 16.7%, while emerging markets have seen a more modest return of 9.5%. That said, the U.S. stock market remains a favorite for many experts due to its strong performance history.

As for bonds, Japanese government bonds might be worth considering. With Japan likely to tighten its monetary policy, these bonds could be a smart play, especially when compared to U.S. and European bonds, where rates are expected to go lower.

Conclusion

The world of investing can sometimes feel like a stormy sea. But with the right mindset and strategy, you can ride the waves and even benefit from them. Volatility isn’t something to fear – it’s something to embrace. The key is to think long-term, diversify your investments, and focus on quality stocks.

The market is full of opportunities if you know where to look and how to prepare. So, buckle up and enjoy the ride, because the ups and downs are all part of the journey to financial success.

Source:

  1. Source 1
  2. Source 2
  3. Source 3
What a membership adds

That's the whole analysis, published in full

This one went out with nothing held back. What a membership adds is everything around it: the members archive, the premium charts and the live sessions, plus every issue as it goes out.

This analysis in full, and every one that follows
700+ analyses in the searchable archive
The premium charts and the monthly live sessions
Plus 5 bonuses included, free
Price locked forever
Monthly live mastermind $1,197/y
Premium charts and free dashboard access
700+ research analyses
"51 Macro Strategies" free copy of the book
Annual

PRO Member

$570

per year, or $47 a month

Become a PRO member →

15-day money-back guarantee. If it isn't for you, just write to support@macromornings.net within 15 days of your payment and you get a refund, minus the payment processing fees. No forms, no questions.

One payment

Lifetime

$798 $1,140

once, no renewal, price locked

Last seat at $798, then $1,140

Take the lifetime seat →

15-day money-back guarantee. If it isn't for you, just write to support@macromornings.net within 15 days of your payment and you get a refund, minus the payment processing fees. No forms, no questions.

Cancel anytime, no tricks.

Keep reading

More from Insights

What came before this one, what came after, and something recent from the archive.

Alessandro, founder of Macro Mornings
Written by

Alessandro

Founder and head of research. Every note here carries 1 name: the person who builds the model signs the view and answers the email when it's wrong. Weekly since 2022.

About →

Free account

Your markets,
read every week.

The dashboard behind everything published here: the outlook on 13 markets, the reasoning behind each one and the strengths and weaknesses set against it. Open it with just your email, no card.

Macro Asset Dashboard Updated weekly Free account

Your desk

Up to 4 markets, the direction of the week for each, as soon as you log in

S&P 500 Direction of the week
Gold Direction of the week
US Dollar Index Direction of the week
Treasuries 20+y Direction of the week
  • NewYour desk
  • NewAn email when the outlook on your markets changes
  • NewCharts from the Institutional Report on every market

All 13 markets, with their outlook every week

VIX
US Dollar Index
Emerging Markets
Developed Markets
S&P 500
NASDAQ
Crude Oil WTI
Commodities
Gold
TIPS
Short / Interm. Treasuries
Treasuries 20+y
REITs
Open your free dashboard → What's inside the dashboard
13 markets · weekly outlook · since 2022 Usually updated on Sundays

Every week

The next note goes out this week

Same framework, 13 markets, free to 55,000+ investors.

Subscribe free →