Market Update – November 11th, 2024

Financial Markets

Markets had a strong week, with U.S. stocks reaching new all-time highs as investors reacted positively to the clear outcome of the U.S. presidential election announced Wednesday, followed by a 25-bps rate cut from the Federal Reserve on Thursday. By Friday’s close on November 7th, the Nasdaq Composite rallied 6.09%, the Dow Jones Industrial Average gained 5.25%, and the S&P 500 rose 4.95%. Bonds also posted modest gains, with the Barclays Aggregate Bond Index increasing by 0.38%.

Market News

Election

Early morning on Wednesday last week, former President Donald Trump was declared president-elect for the second time following his 2016 win, after flipping several key swing states. Largely due to the speed of the results, US stocks rallied and the VIX dropped sharply Wednesday, as many previously held concerns that the results could have taken days longer to call. Alongside the presidential race, Republicans also secured control of the Senate, while the outcome in the House of Representatives remains undecided.

FOMC Meeting

During the November FOMC meeting, the Federal Reserve announced the second rate cut, as expected. This time, they chose to reduce the Federal Funds rate by -0.25%, bringing the target range to 4.5%–4.75%, aligning with the Fed’s ongoing efforts to navigate the current economic landscape carefully.

At the press conference, reporters questioned Fed Chair Jerome Powell about the central bank’s independence in light of President-elect Donald Trump’s past comments suggesting that the president should have greater control over interest rates. Powell responded briefly but firmly, emphasizing the Fed’s apolitical stance.

When asked if the president could fire or demote him, Powell replied, “Not permitted under the law.” Powell is expected to remain as Federal Reserve Chair through 2026, when the president will then be able to select a new Chair from among the sitting Federal Reserve governors, with the approval of the Senate.

Looking ahead, the next significant decision from the Fed will occur during its final meeting of 2024 in December. Current market expectations suggest about a one-third chance that the Fed will hold rates steady, with a two-thirds probability of another 0.25% cut to conclude the year.

Source: CME Group FedWatch

ISM Services. October’s ISM Services Index came in at 56%, up from 54.9% in September, the highest reading since July 2022. This marks the 50th expansion in the past 53 months, with 14 of 16 service industries reporting growth. Only “Other Services” and “Management of Companies & Support Services” sectors saw declines.

Service businesses also reported impacts from recent union strikes and hurricanes. Companies indicated that union port strikes had a limited impact on business and supply chains. However, Hurricane Helene caused significant disruption, affecting many businesses, for example, one IV production plant that accounts for 60% of the country’s supply of IV bag fluid faced significant damage in North Carolina.

Additionally, employment opportunities in the service sector reportedly increased in October. Overall, October’s ISM Services Index points to a very positive month, suggesting that the U.S. service sector remains on stable footing.

Source: ISM

Consumer Sentiment

Heading into the election, November consumer sentiment improved for the fourth consecutive month, reaching its highest level in six months. Consumer sentiment rose 19.1% compared to a year ago and increased 3.5% in the month. However, current economic conditions showed a slight decline, falling -5.7% from the previous year and down -0.8% from October. On the other hand, consumer expectations surged by 38.2%, rising 5.9% in the month. This jump in sentiment could be attributable to consumers’ political preferences, broader economic conditions improving, and a variety of other influences.

Source: University of Michigan

Summary

U.S. stocks reached new highs after the presidential election and a 25-basis point rate cut by the Federal Reserve. Donald Trump was declared president-elect after winning key swing states, and Republicans took control of the Senate. The Fed’s rate cut brought the Federal Funds rate to 4.5%–4.75%, and Chair Jerome Powell emphasized the Fed’s independence. Meanwhile, the ISM Services Index showed strong growth in October, despite disruptions from Hurricane Helene, and the University of Michigan’s Consumer Sentiment Index signaled an increasingly optimistic outlook for the U.S. economy.

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Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

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