Nasdaq still optimistic despite longer rate hikes
Nasdaq, the technology analytics firm that powers the world's leading stock exchanges including the US and the Philippine Stock Exchange (PSE), said its forecast for 2024 for the capital markets here and abroad has remained optimistic even as the US grapples with rate hikes and the world reels from the Israel-Hamas conflict.
Despite the "tragedy in the Middle East," Nasdaq Capital Access Platforms President Nelson Griggs said in a recent press conference that the conflict "has not impacted the markets to a large degree unless there will be more escalation outside of where it is today."
The primary drivers of the US markets currently are the interest rate environment and the 10-year bonds that have crossed over five percent, which Griggs noted has not happened in the last 16 years.
Last Oct. 23, US media reported that the benchmark 10-year US Treasury yields, which were also used to inform future interest rates, rose to 5 percent, leading to the imposition of possible rate hikes by the Federal Reserve.
"So that just drives expenses up for everything – home loans, auto loans, business loans. I think that has just gone on a bit longer than we had anticipated. At the same time, we also thought we'd be in a recession in the US by now, but we're not. Those two competing factors are really what we're watching," he said.
In the Philippines, the central bank recently raised its policy rate by 25 basis points to 6.5 percent.
Griggs said that for now, they predict that "rates are going to be higher for longer as there's anticipation that it may be going down in the first quarter of the next year," with forecasts of a rate cut put out for the second part of 2024.
"The big question in the US is when is the consumer starting to feel some of the pressure of these higher interest rates. Now we're not. Our job market is great, people are spending money. This ongoing inflationary pressure and high interest rates are putting a damper on some of the capital markets activity," he explained.
He also mentioned that while every market is different, a lot of the markets are "taking cues from where we're going in the US." To that, he said they are "optimistic for 2024, probably more in the back half," with continued activities from the capital markets.