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Q2 2024 Investment Outlook

CIO Roundtable: Is the Market Too Optimistic?

Stocks posted a remarkable close to the first quarter, and credit spreads are tight. Have the optimists gotten ahead of themselves? What's the data telling us—and where do capital markets go from here?

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Watch On Demand: CIO Roundtable

Key Takeaways

  1. Policymakers are proceeding cautiously.

    We believe the Federal Reserve’s (Fed's) projection of three rate cuts in 2024 is still reasonable, but we don’t expect the central bank to ease quickly or aggressively.

  2. Are investors too optimistic?

    There are many reasons to be upbeat, but threats to a soft landing remain, and we can’t be sure the economy will escape a recession.

  3. Stocks appear to be priced for perfection.

    We think there’s plenty of room for disappointment amid high valuations, optimistic profit expectations and unfinished business in the inflation fight.

  4. We expect resilient economic growth in emerging markets.

    Positive technology trends in Asia and lower rates and investments in nearshoring in Latin America are among the forces fueling emerging markets (EM) growth.

  5. A pause in hikes has historically been positive for bonds.

    While bond returns have been robust during the year after a peak in the fed funds rate, stock market returns have been mixed.

  6. Higher 2024 profit estimates reflect a stable economy.

    However, earnings forecasts for 2025 may be too high, given the Fed’s restrictive monetary policy.

References to specific securities are for illustrative purposes only and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.

Diversification does not assure a profit nor does it protect against loss of principal.

Generally, as interest rates rise, bond prices fall. The opposite is true when interest rates decline.

Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.