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Barron's Consumer Spending Is Likely to Ease. That Could Help Lower Inflation.

This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron's.

Household Income Lags FX Daily INGFeb. 29: U.S. PCE figures released Feb. 29 confirmed what most had expected: Inflation stayed too hot in January. However, as discussed by our U.S. economist, there are still hopes that the disinflationary process will resume in time for a June rate cut by the Federal Reserve. Personal income and spending figures came in strong, too, but real household disposable income didn’t grow in January. We must remember how crucial this is to fuel real consumer spending now that excess savings have almost entirely run down. With the spending push likely to ease, inflation should come down more steadily.

Francesco Pesole

Passive Turns Aggressive Market Update CressetFeb. 29: Assets in passively managed funds surpassed those in actively managed funds for the first time ever in January 2024, marking a milestone in the decades-long rise of index investing. The total for January was $13.3 trillion in passive U.S. mutual funds and ETFs versus $13.2 trillion in active mutual funds.

The ascent of passive strategies has raised some concerns about their impact on market efficiency, price discovery, and volatility. Recent research suggests passive investing has made stocks less sensitive to news and events, increased volatility, and led to less efficient markets overall. This could undermine the premise behind passive funds if indexing becomes so widespread that price signals get distorted.

While the rise of passive strategies warrants continued monitoring, their benefits for most investors still outweigh their challenges. Passive funds offer investors simple, diversified market exposure at virtually unbeatable costs. While the heyday for traditional active stock-picking may be over, shifts caused by the rise of passive investing look likely to unlock new opportunities for us in public and private investments.

Jack Ablin

Commodities Have the Blues Insights Heritage CapitalFeb. 29: Commodity markets remain outside the velvet ropes. Prices of most major commodities aren’t exactly weak, but are mostly below their levels of a couple of years ago and so have exhibited lousy relative performance over this period. In large part this can be blamed on the weakness of the Chinese financial markets, which has sapped some of the traditional speculative flows into the commodity complex from that part of the world.

Mostly, though, we would blame indifference, and the use of the commodity complex and associated sectors as a relentless source of funds. This continues to be most obviously true of precious metals, especially gold, which has established itself above $2,000 [an ounce] on a medium-term basis for the first time in its history ). But [gold] ETF holdings continued to decline during the vast majority of trading sessions, hitting a new four-year low recently at 82.54 million ounces.

Michael Shaoul, Timothy Brackett