Source: CBO.gov
The economic wheels of 2024 are steadily grinding away, with some interesting projections for the economic outlook. The Congressional Budget Office (non-partisan analysis for the US Congress) has issued several projections for the 2024 – 2034 period. Foremost among them is the increase in public debt held by the public. The figure is forecast to grow from 99% of GDP at the end of this year to 116% by the end of 2034.
Federal budget outlays this year are expected to remain at 23.1% of GDP through 2028. If spending programs continue for elderly people after 2028, net interest costs will drive up outlays towards 24.1% of GDP by 2034. Interestingly, government revenues amounted to 17.5% of GDP this year but will drop to 17.1% in 2025. After that, revenues are expected to climb towards 2027 at around 17.9%. Importantly, the US economy faces several inflation, interest rates, and economic growth challenges.
We know that headline inflation slowed in 2023 and is expected to continue slowing in 2024. The Fed target rate of 2% remains on the horizon, but whipsaw activity concerning monetary policy is likely to continue.
As evidenced by the economy’s performance in 2024, a slowing is predicated, given the rising unemployment. Restrictive monetary policy (high interest rates) is forcing a decrease in mortgages, credit, and investment expenditure. Only by 2025 are we likely to see a relaxation in this regard to expand economic activity further
Current Performance of the NASDAQ Composite Index
Source: StockCharts NASDAQ Composite Index February 2024
The above chart reflects the bullish performance of the NASDAQ composite index. The level of 15,990.66 is reflected above the 50-day moving average of 14,974.83 and significantly higher than the 200-day moving average of 13,820.40. We can also see the Bollinger Bands in action.
For example, the upper band reflects a level of 16,006.54, almost tangential to the current level of the NASDAQ. The middle band is significantly lower at 15,420.68, with the lower band at 14,834.81. This indicates the strong likelihood of the retracement towards the mean, indicating that the NASDAQ is likely to drop significantly after profit-taking.
Stock, commodities, indices, and forex traders act on this economic news. We see evidence of this in trading platforms with traditional and derivative products. For example, CFD traders at top-ranked platforms in Canada, the UK, and elsewhere are short-term bullish but long-term bearish on many US equities.
CFD trading is an interesting case for retail and institutional traders. It presents as a hedge against reversals in the stock market by allowing traders an option to short financial instruments via contracts that mirror the price movements of the underlying securities. Of course, these financial instruments are volatile, risky, and unsuitable for all traders.
US Dollar Index
One of the most important measures of US dollar performance is the XY – the US dollar index. For the year-to-date, the US dollar index has increased from 102.20 in January to 104.08. This indicates a strengthening of the US dollar over the short term.
It measures dollar strength in a basket of currencies, including the Japanese yen, Euro, British Pound, Swiss Franc, Canadian dollar, and Swedish krona. Like equities, the US dollar index is bullish with a 2.71% + return for the year to date. The one-year performance is less optimistic at just 0.43%.
Not surprisingly, the CAD/USD currency pair – a major forex pair – has a three-month performance of +2.58%, with a year-to-date performance of -1.56%. This indicates that the Canadian dollar has weakened relative to the greenback despite rising oil prices, which prop up the Canadian economy and currency.
Similarly, the EUR/USD currency pair has a yearly performance of 0.57%, which is stable monthly. The euro has a 52-week performance of 3.21% against the dollar, in line with the current performance and strength of the world’s reserve currency.
Traders and investors tend to act on these economic indicators through conventional and contrarian trading and investment options. We see this evidence through put-and-call options with short-term trades through forex CFDs at brokers in Canada, Europe, and the UK. Currency traders tend to be influenced by microeconomic and macroeconomic variables, including geopolitical shocks, leading economic indicators, etc.
As we navigate the evolving landscape of the US economy, informed by the latest projections and market trends, it is clear that while challenges lie ahead, strategic investment and trading opportunities persist. Understanding these dynamics is crucial for making informed decisions in a complex financial environment, always bearing in mind the inherent risks and the importance of cautious optimism in investment strategies.
