Wealth Outlook 2024 - Slow then grow

Glossary 138 are calculated into one number that reveals how sensitive a bond’s value may be to interest rate changes. Electoral College comes into play every four years in the United States. Voters select a group of electors whose only purpose is to elect the president and vice president. This group of electors and the electoral process that goes with it is known as the Electoral College. The total num- ber of electors is 538. The number of electors assigned to each state is equal to its two Senate seats plus its number of seats in the House of Representatives. Federal Open Market Committee (FOMC) is the branch of the Federal Reserve System that determines the di- rection of monetary policy in the US by performing open market operations. The committee ismade up of 12mem- bers, or participants, who meet eight times a year to dis- cuss whether there should be any changes to near-term monetary policy. A vote to change policy would result in either buying or selling US government securities on the openmarket tomeet the Fed’s “dual mandate” of promot- ing employment and restraining inflation. Effective federal funds rate (EFFR) , or the term fed funds rate, refers to the target interest rate range set by the FOMC (see above). This target is the rate at which com- mercial banks borrow and lend their excess reserves to each other overnight. The federal funds rate can influence short-term rates on consumer loans and credit cards. And investors keep an eye on it because it impacts the stock market as the “risk-free rate” that competes for in- vestment capital. FDIC banks cost of funds refers to the costs associated with borrowing for banks, since borrowing money costs money both for individuals getting a mortgage and large banks granting that mortgage. Fed funds market-implied estimates are determined by a type of futures contract quoted as 100 minus the im- plied 30-day federal funds rate. In other words, the con- tract price indicates what the market expects the federal funds rate to be when the contract expires. Foreign direct investment (FDI) is an ownership stake in a foreign company or project made by an investor, com- pany, or government from another country. Free cash flow yield acts as a goodmetric for cash flow in comparison to a company’s size. It acts as a good indica- tor of how solvent or financially capable a company is in the event there is a need to access cash quickly. Gilts are the government bonds (the equivalent of US Treasurys) of the UK, India, and the Commonwealth countries. The name comes from historical certificates with gilded edges issued by the British government. Growth stocks are those of companies that have the po- tential to outperform the overall market because of their future potential more than their current level of prof- itability. In contrast, “value stocks” trade below what their current earnings might otherwise indicate. There is long-running debate over which provides superior re- turns over time, and each tends to become or less pop- ular depending on various macro conditions. One of the most impactful factors is interest rates, which determine the rate at which future cash flows are discounted back to their present value. Lower “discount rates” tend to favor growth, while higher tend to be better for value. Inflation Reduction Act is a major piece of US legislation signed into law in August 2022 aimed at tackling infla- tion, promoting economic growth, and establishing US leadership in the fast-growing energy systems of the fu- ture. The act includes a broad range of measures, includ- ing tax policy changes, investments in clean energy and infrastructure, support for US workers, and enhanced powers for Medicare to lower healthcare costs. M2 is a measure of the US monetary supply that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers' checks), plus savings deposits (including money market deposit accounts), small time deposits under $100,000 and shares in retail money market mutual funds. Net interest margin (NIM) compares the net interest in- come a financial firm makes from credit products (loans andmortgages), with the outgoing interest it pays savings customers for accounts and certificates of deposit (CDs). When rates go up, it’s usually beneficial for banks as loan interest rates rise faster than deposit interest rates. “Period of monetary neglect” famously occurred in the run-up to the 1969–70 recession when the fed tightened Wealth Outlook 2024