Market Quote: U.S. Economy Surges, Stagflation Threatens, Washington Simmers

Author: The editor's desk

April 17, 2024

A mid-week analysis of what's happening in global financial markets from the perspective of AGF's investment management team.

Staggered Approach?

The U.S. is currently experiencing a Goldilocks economy, characterized by stability that is neither too hot to cause overheating nor too cold to trigger a recession. Yet, one of the potential risks that some investors could face moving forward is a scenario whereby inflation remains elevated and growth eventually slows too much as the impact of higher rates takes further hold.

Moreover, the prospect of stagflation could build even more if geopolitical tensions rise, potentially interrupting global transport routes and energy security. This not only adds to the threat of diminishing economic activity, but could also hinder future corporate profits and pressure, in particular, companies with already high multiples - unless, of course, their earnings and guidance are able to match or surprise market expectations.

Thus, we believe high valuation and high growth companies could struggle more than others in a stagflationary environment should it come to pass.

Fade the Aid?

Dramatic U.S. economic growth could have a major impact on interest rates, with the Atlanta Fed GDP Now predicting economic growth at 2.8% after Monday's blowout retail sales report. This has to be a shock for the U.S. Federal Reserve (Fed), which may be frozen for months to come - unlikely to cut rates as long as the economy is growing above trend with inflation not falling to the Fed's 2% goal.

Meanwhile, U.S. Congress is moving awkwardly toward passage of a nearly US$100 billion spending package that would provide enormous aid to Ukraine, Israel and Taiwan. But it's a very messy process. Some Republicans want to oust Mike Johnson, the House speaker, if he seeks votes from Democrats to pass the bill.

For full bios, please visit our contributor's page.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.

Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of April 17, 2024 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.

This document may contain forward-looking information that reflects our current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein.

For Canadian investors: Commissions, trailing commissions, management fees and expenses all may be associated with investment fund investments. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The term AGF Investments may refer to one or more of these subsidiaries or to all of them jointly. This term is used for convenience and does not precisely describe any of the separate companies, each of which manages its own affairs. AGF Investments entities only provide investment advisory services or offers investment funds in the jurisdiction where such firm, individuals and/or product is registered or authorized to provide such services.

^® ™ The "AGF" logo and all associated trademarks are registered trademarks or trademarks of AGF Management Limited and used under licence.

RO:20240417-3519677

Public link

Please use the above public link if you want to share this noodl on another website.