Market Update: November 11, 2024
Economic news for the week included the U.S. Federal Reserve cutting the Fed funds rate by another quarter-point. In terms of data, ISM services ticked higher, remaining in strong expansion, and productivity saw gains in Q3, although labor costs rose as well.
U.S. stocks gained ground for the week following the conclusion of the Presidential election, while foreign stocks saw mixed results. Bonds fared positively as yields pulled back from recent highs. Commodities were mixed, with gains in energy offset by a decline in metals.
U.S. stocks were little changed in the early part of the week, before the results of Tuesday’s general election. The strong Republican showing resulted in a strong rally starting Wednesday, with votes still being counted to determine the composition of the House and possible red sweep. The general hope for markets with this political arrangement is lower corporate taxes, a light-touch regulatory environment, and stronger upcoming earnings growth. The ends of election seasons have also tended to prompt a ‘relief rally’ of sorts historically. The FOMC rate cut was icing on the cake, although expectations for next year have become less dovish. Small caps fared especially well, as would be expected in such an environment.
Every S&P 500 sector saw a gain last week, with more cyclical groups leading with returns of well over 5%, including consumer discretionary, energy, industrials, financials, and technology; laggards included the lower-beta defensive group of consumer staples, health care, and utilities. Real estate also rose several percent along with lower interest rates.
Foreign stocks were little changed on net, with slight gains in Japan offset by weakness in Europe and the U.K. Aside from disappointing earnings, there has been rising concern in Europe surrounding proposed detrimental trade policy/tariffs in the next U.S. administration, adding to already challenging slow economic growth conditions on the continent. This was highlighted by Germany moving up their planned election by six months. The Bank of England cut rates by a quarter-percent to 4.75%, though it was a bit hawkish in language noting potentially higher inflation in the next year due to the U.K. budget. The Bank of Sweden dropped rates by a half-percent along with sluggish economy and slowing inflation concerns, while the central bank of Norway kept rates unchanged. Emerging markets were also mixed, as markets digested the impacts of the election on individual countries, through trade, currency impacts, and U.S. re-shoring efforts away from China.
Bonds fared well as yields moderated from the prior week, led by high yield and investment-grade corporates, which outperformed U.S. Treasuries. The 10-year Treasury yield fell back a bit on the week but remains well above the lows for the year of 3.6% in mid-September. Foreign bonds were mixed, with the U.S. dollar higher.
Commodities were mixed last week with stronger agriculture and energy, offset by softer industrial and precious metals. Crude oil prices rose about a percent last week to $70/barrel, along with hopes for a more accommodative petroleum environment in the U.S. but tighter sanctions on several other producers, like Iran, although supply and demand continue to see mixed influences.
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.