Market Perspectives
Zevin Asset Management
Q3 2024 Market Outlook

Maybe it really is different this time. A typical business cycle usually consists of an overheating economy followed by higher policy rates imposed by central banks. This eventually leads to a slowing economy, and in 6 out of the last 7 monetary tightening episodes in the U.S since 1970, the economy has fallen into recession. Higher lending rates slow consumption, leading to layoffs, which further slows consumption and more layoffs, and so on. However, this cycle has been different so far. When the Fed began raising interest rates in 2022 to fight inflation, the personal consumption response was much more muted than usual, thanks to previous emergency pandemic stimulus. The U.S. economy has slowed somewhat in response to tighter monetary policy, but employers have been mostly reluctant to implement significant layoffs with the fresh and painful memory of the 2020-2021 pandemic reopening when consumer demand rebounded sharply but employers had a hard time finding workers to satisfy demand. So-called “labor hoarding” has become a significant attribute of the current economic cycle, which has contributed to the relative strength in the labor market, consumption, and the economy in general.

Stig Zarle

5G Rising

At this point, you have likely heard the term “5G” thrown around in sim­i­lar fash­ion to AI (arti­fi­cial intel­li­gence), autonomous dri­ving, and IoT (inter­net of things). The evo­lu­tion of fifth-​generation (hence, 5G) cellular/​mobile net­works will pro­vide a host of oppor­tu­ni­ties for busi­nesses, con­sumers, pub­lic enti­ties, and investors alike in the years ahead as the new mobile com­mu­ni­ca­tion super­high­way will facil­i­tate the faster trans­mis­sion of increas­ingly large data vol­umes. While increased data flow brings with it incre­men­tal cyber­se­cu­rity and per­sonal infor­ma­tion shar­ing chal­lenges, if man­aged respon­si­bly the ben­e­fits of 5G stand to out­weigh the risks.

Auto­mo­bile Indus­try & the Elec­tric Vehi­cle Revolution

The growth of the global auto­mo­bile indus­try over the past cen­tury has been intrin­si­cally tied to the inter­nal com­bus­tion engine. Rapid advances in bat­tery tech­nol­ogy rep­re­sent a sea change for the indus­try that has fueled the accel­er­at­ing global roll­out of elec­tri­fied vehi­cles that will dis­place demand for con­ven­tional vehi­cles. The elec­tri­fi­ca­tion of vehi­cles, both pas­sen­ger and com­mer­cial, is a game changer that will dis­rupt the staid indus­try. Tra­di­tional man­u­fac­tur­ers, sup­pli­ers, and dis­trib­u­tors will be forced to con­front the new elec­tric car real­ity and the dif­fer­ent com­peti­tors, eco­nom­ics, and reg­u­la­tions that accom­pany it. If done right, this impor­tant shift can have a sig­nif­i­cant pos­i­tive effect on car­bon emissions.