Market Update: December 2, 2024
On a holiday-shortened week, economic data included U.S. GDP coming in unchanged from the initial estimate, higher home prices, but a drop in durable goods and new home sales, with some negative hurricane effects.
Equities gained globally, with foreign outpacing U.S. due to a weaker U.S. dollar. Bonds also fared positively, as interest rates fell back upon a positive reaction to the new administration’s Treasury secretary nominee. Commodities fell as fading Middle East concerns negatively affected the prices of oil and gold.
U.S. stocks continued upward, with several indexes in large, mid, and small cap reaching further all-time highs. In an abbreviated trading week, Monday started positively, with the nomination of hedge fund manager Scott Bessent for Treasury secretary, which was seen as a conventional choice. Bessent is viewed as relatively market friendly and pragmatic, while also a promoter of lower fiscal deficits and more tempered/gradual tariff policy, which removes some risk of more extreme and unanticipated trade policy repercussions. At the same time, the president-elect surprised markets by posting the intention of imposing 25% tariffs on both Mexico and Canada, our largest trading partners, in addition to an extra 10% on China, all related to flows of illegal immigrants and fentanyl, and 100% tariffs on EM countries that supported attempts to replace the U.S. dollar as the global reserve currency. However, news of a cease-fire agreement between Israel and Hezbollah had a positive influence on sentiment.
Nearly every U.S. stock sector gained ground last week, led by consumer discretionary as well as communications and the defensive group of health care and utilities. The sole laggard was energy, down -2% in keeping with a drop in oil prices. Real estate also gained about 2% for the week, with relief from lower interest rates.
Foreign stocks fared positively for the week, with gains in Japan, U.K., and Europe all outperforming the U.S., with help from a weaker U.S. dollar. This was especially pronounced relative to the Japanese yen, which gained several percent upon expectations of a BOJ rate hike in coming weeks, which could close the yield differential somewhat. Economic data in Europe, particularly in Germany, has remained soft. This has resulted in mixed sentiment, but also higher chances of continued ECB easing, which markets are fond of. Emerging markets were down on net, with gains in China offset by declines in the rest of Asia and Brazil, as inflation came in far stronger than expected, with expected upward pressure on interest rates.
Bonds experienced gains last week, as U.S. Treasury yields fell along with the calming influence of the new administration’s pick for Treasury secretary. Investment-grade corporates outperformed governments slightly, both of which outperformed high yield and floating rate bank loans, which ended with less dramatic gains for the week. Unhedged foreign bond indexes were several percent higher thanks to the weaker dollar, while hedged were largely in line with U.S. bonds.
Commodities generally fell back last week, despite the normally helpful influence of a weaker dollar. While industrial metals rose slightly, energy and precious metals led the downward move. Crude oil fell over -4% last week to $68/barrel, as, along with safe haven gold, prices retreated after the report of a cease-fire deal between Israel and Hezbollah that are seen as decreasing tensions in the region.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.