October 2, 2024: How Restrictive Are Interest Rates?

Long awaited stimulative actions from the Chinese government captivated investor attention last week. Whether these actions deliver their intended jolt to China’s economy remains to be seen. Indisputable, however, was the stimulative effect on the Chinese stock market. The CSI-300, which tracks the performance of the top 300 stocks traded in the Shanghai Stock Exchange, rose 25% in one week—the strongest week for that market since 2008.

Perhaps lost amid that frenzy were updated figures to U.S. economic growth following the Covid-19 related economic shutdowns. These updated figures signaled the U.S. economy expanded more significantly than previously understood, particularly throughout 2022 and the first half of 2023. Altogether, the Bureau of Economic Analysis reported that the economy grew by 5.5% (inflation adjusted) from the second quarter of 2020 through the end of 2023. This updated figure compares to a previously reported 5.1%.

The most dramatic revisions to the data occur in 2022 and 2023—the period in which the Federal Reserve embarked on its most aggressive interest-rate hikes in 40 years. That the U.S. economy appears to have taken those hikes in stride suggests that interest-rates may not need to fall far from here for economic growth to continue.

Weekly Market Update: October 2, 2024