We are pleased to present our Market Analysis and Economic Outlook Report for the first half of 2024. As a Nonprofit Registered Investment Advisor, our goal is to provide you with insightful and actionable analysis of the current economic landscape. This high level report highlights key market trends, economic indicators, and potential impacts on nonprofit financial strategies. By understanding these factors, we aim to support your organization's mission and financial health, helping you navigate the economic environment with informed decision-making.‍

Interest Rates

The Federal Reserve has continued to maintain a tight monetary policy stance throughout the first half of 2024. The Federal Open Market Committee (FOMC) has kept the federal funds rate in a range of 5.25% to 5.50%, reflecting a sustained effort to combat inflation, which has remained above the Fed's 2% target. The central bank has indicated that it will continue to monitor economic data closely, particularly inflation and employment figures, to determine any future adjustments to the interest rate.

Yields

Yields on U.S. Treasury securities have experienced significant fluctuations in 2024. The yield curve remains inverted, with short-term yields higher than long-term yields, signaling potential concerns about future economic growth. Key yields as of mid-2024 are:

• 2-year Treasury yield: Approximately 4.85%
• 10-year Treasury yield: Approximately 4.10%
• 30-year Treasury yield: Approximately 4.30%

The inversion of the yield curve has persisted, which traditionally signals a potential recession within the next 12 to 24 months. However, the degree of inversion has started to lessen slightly, suggesting some stabilization in market expectations.

Economic Indicators

• Inflation: Inflation has moderated somewhat compared to the highs seen in 2022 and early 2023, but it remains elevated. The Consumer Price Index (CPI) for April 2024 showed an annual increase of 4.2%. Core inflation (excluding food and energy) remains sticky around 3.8%.
• Employment: The labor market remains robust, with the unemployment rate hovering around 3.6%. Job growth has slowed compared to the post-pandemic surge, but wage growth has kept pace with inflation, helping to sustain consumer spending.
• GDP Growth: The U.S. economy grew at an annualized rate of 2.0% in the first quarter of 2024, driven by strong consumer spending and business investment. However, growth is expected to slow in the second half of the year due to the lagged effects of higher interest rates.

Sectoral Performance

Technology: The technology sector has shown resilience, with strong earnings reports from major tech firms. Investments in AI and cloud computing continue to drive growth.

Energy: Energy prices have stabilized after the volatility of previous years. The shift towards renewable energy sources and the stabilization of oil prices around $70 per barrel have contributed to a balanced outlook for the sector.

Consumer Goods: Consumer confidence remains strong, supporting retail and consumer goods sectors. However, higher interest rates are starting to impact big-ticket purchases such as homes and automobiles.

Predictions and Outlook

The Fed is likely to hold rates steady for the remainder of 2024 unless inflationary pressures significantly abate. Some analysts predict a possible rate cut in early 2025 if economic growth slows more than expected.

GDP growth is projected to slow to around 1.5% to 1.8% for the full year 2024, reflecting the impact of higher interest rates on economic activity. Inflation is expected to gradually decline, with year-end CPI potentially falling to around 3.5%, contingent on stable energy prices and easing supply chain constraints.

Stock market performance is expected to be modestly positive for 2024, with earnings growth in key sectors like technology and healthcare supporting valuations. However, market volatility could increase due to geopolitical risks and domestic political uncertainties as the 2024 presidential election approaches.

As for the housing market, higher mortgage rates have cooled the housing market, with slower price appreciation and lower sales volumes. This trend is expected to continue throughout the year.

Nonprofit Impact

The first half of 2024 has presented a dynamic economic landscape that could significantly impact nonprofit financial strategies. Rising interest rates and inflationary pressures have increased operating costs, while fluctuations in the stock market may affect endowment values and investment returns.

Additionally, changes in donor behavior, influenced by economic uncertainty, could alter fundraising outcomes. Nonprofits may need to adapt by diversifying their revenue streams, reassessing their investment portfolios, maximizing their returns, ensuring FDIC coverage on reserves, and implementing cost-control measures to shore financial stability and continue fulfilling their missions effectively.

Conclusion

The economic outlook for the United States in 2024 is one of cautious optimism. 

While challenges such as persistent inflation and high interest rates remain, the underlying economic fundamentals, including a strong labor market and resilient consumer spending, provide a buffer against significant downturns. Investors and businesses should prepare for a period of moderated growth and continued market volatility.

Infinite Giving Advisory Services LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Infinite Giving and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Infinite Giving unless a client service agreement is in place. This content is provided solely for informational purposes. Investors’ experiences may vary from the content. Nothing in this presentation constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Infinite Giving manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary.