For investors, the first six months of 2024 were dominated by one question: when will the US Federal Reserve start cutting interest rates? The answer was it didn’t, as it deemed inflation too high.
Now the question is set to linger over the second half of the year, too. This time, markets may get the answer they crave.
Markets expect one and possibly two US rate cuts this year. When they arrive, we will be in a different world.
If you are looking to invest $10,000 over the next six months, here are three top investment trends to consider right now.
The first should fly if we hit peak interest rates, the second will benefit if lower borrowing costs trigger an economic revival, while the third suggests one of the year’s best asset classes has further to run.
As with any investment, consider both the risks and rewards and aim to hold for years, not just six months, to give your choices time to deliver.
Fixed interest
As interest rates stay “higher for longer” than anticipated, cash and bonds are still king.
When rates are finally cut, easy access savings rates will inevitably follow. So will yields on government bonds.
It may, therefore, be wise to lock in today.
Anna Bowes, founder of Savings Champion, says fixed-rate savings bonds are in a strange place right now.
“Normally you’d expect to be rewarded for tying up your cash for longer. That’s no longer the case. Banks don’t want to offer interest rates that will be far above the market price in a year or so,” she adds.
As consumer price growth slows, many fixed-rate savings bonds now offer an inflation-beating return for the first time in years.
“By locking up your money in a fixed-rate savings bond, you can secure an interest rate that is likely to outpace inflation for several years to come,” Ms Bowes says.
In 2021, the yield on a 30-year US government bond, or Treasury, was just 2.04 per cent. Today, it's 4.5 per cent.
Yet, we are now approaching the tipping point, says Vijay Valecha, chief investment officer at Century Financial in Dubai.
“Recent dovish remarks from the Fed, slowing gross domestic product growth and a weakening labour market have increased the probability of a September rate cut from 64 per cent to 73 per cent,” he adds.
Buying US Treasuries today would allow investors to lock into a higher yield. There is a second attraction. When bond yields fall, prices rise, giving bond investors a capital gain, too.
Mr Valecha suggests investing in exchange-traded funds (ETFs) targeting long-duration government bonds such as the iShares 20+ Year Treasury Bond ETF and Vanguard Long Term Treasury Index Fund ETF.
While inflation and interest rates may fall, we can’t expect a return to the era of near-zero rates.
Fund manager BlackRock favours inflation-linked bonds as it sees inflation sticking about the 3 per cent mark.
Those who share that view may be tempted by Treasury inflation-protected securities (TIPS), which are tied to the consumer price index.
The iShares TIPS Bond ETF and Schwab US Tips ETF are popular options.
Smaller companies
Smaller companies tend to be at the mercy of the economic cycle. They typically outperform in a boom but suffer in a downturn.
They have underperformed large caps for years, as higher interest rates drive up the cost of borrowing money to fund growth and inflation discounts the value of their future earnings.
Mr Valecha says they are due for a breakout and this year we might finally see it.
“Small caps are trading at an 18 per cent discount to their fair value, making them highly attractive to investors. Monetary policy easing bodes well as it will allow them to borrow at cheaper rates while increasing the value of future cash flows,” he adds.
Investors will also be willing to take on more risk as the economy heads towards a soft landing, further enhancing their appeal.
Yet the small-cap recovery could take a hit from US political turbulence, warns Jason Hollands, managing director of fund platform Bestinvest by Evelyn Partners.
“If Donald Trump wins November’s US presidential election, this would usher in unfunded tax cuts, higher tariffs, a bigger deficit and higher inflation,” he says.
Economic growth may be higher, but so will borrowing costs.
“This could make life difficult for smaller companies with leveraged balance sheets, so investors need to be super selective if dabbling in small cap stocks,” he warns.
For those willing to balance the risks against the rewards, Mr Valecha highlights the iShares Russell 2000 ETF, Vanguard Small-Cap ETF and WisdomTree Emerging Markets SmallCap Dividend Fund.
Commodities
2024 has been kind to commodities and that may continue in the second half of the year.
Demand for copper is considered a proxy for economic health, as it is used for electricity transmission, construction, electronics, manufacturing and cars.
The price is up almost 20 per cent year to date, in US dollar terms, and could climb higher as global recession fears fade, Mr Hollands says.
“Rate cuts, a recovery in global travel and the drive to net zero should boost demand for a slew of commodities.”
Laith Khalaf, head of investment analysis at AJ Bell, says “hard assets” like commodities are popular as “supply cannot be conjured out of thin air by central bankers or governments, as is the case with money and bonds”.
“Commodities, notably gold and oil, outperformed during the 1970s, a period of lofty inflation and geopolitical tension. They are doing so again,” he adds.
Gold's price is up 12 per cent so far this year to about $2,378 an ounce, Mr Valecha says.
“The rally was fuelled by rate cut expectations, safe haven demand due to geopolitical tensions and continued central bank buying, especially in India and China.”
Gold doesn’t pay income but this will be less of an issue when interest rates start falling and bond yields and savings rates retreat, reducing the opportunity cost of holding the precious metal, he adds.
Rate cuts, a recovery in global travel and the drive to net zero should boost demand for a slew of commodities
Jason Hollands,
managing director, Bestinvest by Evelyn Partners
Also, gold is priced in US dollars. Fed rate cuts will weaken the dollar and make gold cheaper for overseas buyers.
“Gold is likely to be in demand as global investors look to hedge bubbling risks amid a complacent equity market and persistent geopolitical tensions,” Mr Valecha says.
He favours the SPDR Gold Shares ETF, which invests in physical gold and returned 20.6 per cent over the last year.
Mr Hollands suggests a broad-based commodity fund such as the BlackRock World Mining Trust.
The Invesco DB Commodity Index Tracking Fund, First Trust Global Tactical Commodity Strategy Fund and iShares S&P GSCI Commodity-Indexed Trust are all popular.
Killing of Qassem Suleimani
Final round
25 under - Antoine Rozner (FRA)
23 - Francesco Laporta (ITA), Mike Lorenzo-Vera (FRA), Andy Sullivan (ENG), Matt Wallace (ENG)
21 - Grant Forrest (SCO)
20 - Ross Fisher (ENG)
19 - Steven Brown (ENG), Joakim Lagergren (SWE), Niklas Lemke (SWE), Marc Warren (SCO), Bernd Wiesberger (AUT)
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The specs: 2018 Mercedes-AMG C63 S Cabriolet
Price, base: Dh429,090
Engine 4.0-litre twin-turbo V8
Transmission Seven-speed automatic
Power 510hp @ 5,500rpm
Torque 700Nm @ 1,750rpm
Fuel economy, combined 9.2L / 100km
UAE currency: the story behind the money in your pockets
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
Email sent to Uber team from chief executive Dara Khosrowshahi
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle East
Five years ago, Uber launched in the Middle East. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close. Today’s news is a testament to the incredible business our team has worked so hard to build.
It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Uber on,
Dara
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
More from Neighbourhood Watch:
The Voice of Hind Rajab
Starring: Saja Kilani, Clara Khoury, Motaz Malhees
Director: Kaouther Ben Hania
Rating: 4/5
Company Profile:
Name: The Protein Bakeshop
Date of start: 2013
Founders: Rashi Chowdhary and Saad Umerani
Based: Dubai
Size, number of employees: 12
Funding/investors: $400,000 (2018)
The%20US%20Congress%20explained
%3Cp%3E-%20Congress%20is%20one%20of%20three%20branches%20of%20the%20US%20government%2C%20and%20the%20one%20that%20creates%20the%20nation's%20federal%20laws%3C%2Fp%3E%0A%3Cp%3E-%20Congress%20is%20divided%20into%20two%20chambers%3A%20The%20House%20of%20Representatives%20and%20the%20Senate%3C%2Fp%3E%0A%3Cp%3E-%C2%A0The%20House%20is%20made%20up%20of%20435%20members%20based%20on%20a%20state's%20population.%20House%20members%20are%20up%20for%20election%20every%20two%20years%3C%2Fp%3E%0A%3Cp%3E-%20A%20bill%20must%20be%20approved%20by%20both%20the%20House%20and%20Senate%20before%20it%20goes%20to%20the%20president's%20desk%20for%20signature%3C%2Fp%3E%0A%3Cp%3E-%20A%20political%20party%20needs%20218%20seats%20to%20be%20in%20control%20of%20the%20House%20of%20Representatives%3C%2Fp%3E%0A%3Cp%3E-%20The%20Senate%20is%20comprised%20of%20100%20members%2C%20with%20each%20state%20receiving%20two%20senators.%20Senate%20members%20serve%20six-year%20terms%3C%2Fp%3E%0A%3Cp%3E-%20A%20political%20party%20needs%2051%20seats%20to%20control%20the%20Senate.%20In%20the%20case%20of%20a%2050-50%20tie%2C%20the%20party%20of%20the%20president%20controls%20the%20Senate%3C%2Fp%3E%0A
Abu Dhabi Equestrian Club race card
5pm: Abu Dhabi Fillies Classic (PA) Prestige; Dh110,000; 1,400m
5.30pm: Abu Dhabi Colts Classic (PA) Prestige; Dh110,000; 1,400m
6pm: Maiden (PA); Dh80,000; 1,600m
6.30pm: Abu Dhabi Championship (PA) Listed; Dh180,000; 1,600m
7pm: Wathba Stallions Cup (PA) Handicap; Dh70,000; 2,200m
7.30pm: Handicap (PA); Dh100,000; 2,400m
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
LEAGUE CUP QUARTER-FINAL DRAW
Stoke City v Tottenham
Brentford v Newcastle United
Arsenal v Manchester City
Everton v Manchester United
All ties are to be played the week commencing December 21.
Safety 'top priority' for rival hyperloop company
The chief operating officer of Hyperloop Transportation Technologies, Andres de Leon, said his company's hyperloop technology is “ready” and safe.
He said the company prioritised safety throughout its development and, last year, Munich Re, one of the world's largest reinsurance companies, announced it was ready to insure their technology.
“Our levitation, propulsion, and vacuum technology have all been developed [...] over several decades and have been deployed and tested at full scale,” he said in a statement to The National.
“Only once the system has been certified and approved will it move people,” he said.
HyperloopTT has begun designing and engineering processes for its Abu Dhabi projects and hopes to break ground soon.
With no delivery date yet announced, Mr de Leon said timelines had to be considered carefully, as government approval, permits, and regulations could create necessary delays.
UAE currency: the story behind the money in your pockets
Read more about the coronavirus
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
Results
Light Flyweight (49kg): Mirzakhmedov Nodirjon (UZB) beat Daniyal Sabit (KAZ) by points 5-0.
Flyweight (52kg): Zoirov Shakhobidin (UZB) beat Amit Panghol (IND) 3-2.
Bantamweight (56kg): Kharkhuu Enkh-Amar (MGL) beat Mirazizbek Mirzahalilov (UZB) 3-2.
Lightweight (60kg): Erdenebat Tsendbaatar (MGL) beat Daniyal Shahbakhsh (IRI) 5-0.
Light Welterweight (64kg): Baatarsukh Chinzorig (MGL) beat Shiva Thapa (IND) 3-2.
Welterweight (69kg): Bobo-Usmon Baturov (UZB) beat Ablaikhan Zhussupov (KAZ) RSC round-1.
Middleweight (75kg): Jafarov Saidjamshid (UZB) beat Abilkhan Amankul (KAZ) 4-1.
Light Heavyweight (81kg): Ruzmetov Dilshodbek (UZB) beat Meysam Gheshlaghi (IRI) 3-2.
Heavyweight (91kg): Sanjeet (IND) beat Vassiliy Levit (KAZ) 4-1.
Super Heavyweight ( 91kg): Jalolov Bakhodir (UZB) beat Kamshibek Kunkabayev (KAZ) 5-0.
More from Neighbourhood Watch:
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
