Market Update – November 4th, 2024

Financial Markets

It was a volatile week for the markets, with stocks ending in negative territory ahead of the election amid a flood of economic data and earnings reports. As of Friday November 1st, Nasdaq Composite dropped -1.76%, the S&P 500 declined -1.63%, and the Dow Jones Industrial Average slipped -0.79%. Bonds also faced a negative week, as the Barclays Aggregate Bond Index fell -0.72%.

Market News

October Jobs Report

The October jobs report showed the slowest job creation pace since 2020, with the U.S. economy adding only 12,000 new jobs, much below expectations. Despite challenges from union strikes and hurricanes, the unemployment rate remained steady at 4.1%.

Employment gains were concentrated in health care (+52,000), government (+40,000), and wholesale trade (+10,400), while job losses were significant in professional and business services (-47,000) and manufacturing (-46,000), the latter impacted heavily by strikes in companies like Boeing.

Average hourly earnings rose by 0.4% for the month and 4% year-over-year, offering a positive sign of real earnings growth despite the overall labor market slowdown.

Source: Bureau of Labor Statistics

PCE Inflation

In September, annual PCE inflation eased to 2.1%, with core inflation at 2.7%, marking significant progress in the headline number. On a monthly basis, headline PCE rose by 0.2%, while core prices, excluding food and energy, increased by 0.3%. inflation continues to be primarily driven by a rise in services prices (+0.3% MoM), while goods prices saw a slight decline of 0.1%—the fourth decrease in the past five months for the category, indicating mild deflation for goods’ prices in many categories.

Personal Income, Spending, and Saving.

September’s economic data, released alongside the PCE inflation report, showed modest growth in consumers’ income, paired with stronger growth in spending. Personal income increased by 0.3%, while personal spending rose slightly faster at 0.5%, resulting in a drop in the personal savings rate to 4.6%. These figures reflect another stable month, indicating that the U.S. economy remains in a moderate state—neither in recession nor in robust expansion.

Q3 GDP

Real GDP grew at an annual rate of 2.8% in the third quarter of 2024, according to last week’s advance estimate. This growth was driven by higher consumer spending, exports, and federal government spending, with notable contributions to GDP from prescription drug sales, motor vehicle sales, health services spending, and defense spending. Imports, which reduces GDP, also rose in the third quarter. As one of the last few economic indicators before Election Day, this strong growth suggests that the U.S. economy remains stable, with no signs of a recession.

ISM Manufacturing

In October, economic activity within the U.S. manufacturing sector contracted for the seventh month in a row and marked the 23rd contraction over the last 24 months. The Manufacturing PMI dropped to 46.5%, down 0.7% from September’s 47.2%, making it the lowest reading of 2024 and the weakest since July 2023.

Within the index, new orders saw a slight increase, though production declined significantly, largely due to union strikes disrupting output. Additionally, rising prices placed upward pressure on the PMI. Despite challenges in manufacturing, the broader U.S. economy continued to expand for the 54th month in a row, maintaining growth since the brief contraction in April 2020.

Source: Institute for Supply Management

Consumer Confidence

U.S. Consumer Confidence rebounded in October, as reflected in The Conference Board’s Consumer Confidence Index, which rose to 108.7, up from 99.2 in September. This increase marks the strongest monthly gain since March 2021, though consumer confidence remains within the narrow range observed over the past two years.

October’s rise in confidence was broad-based, with improvements across all age groups and most income levels. Consumers aged 35 to 54 showed the sharpest increase in confidence. Meanwhile, on a six-month moving average, households under 35 and those earning over $100K remained the most confident.

Also notable, the proportion of consumers expecting a recession in the next 12 months dropped to its lowest level since the question was first introduced in July 2022. Similarly, the percentage of consumers who believe the economy is currently in recession has also declined. This boost in consumer confidence comes days ahead of a highly anticipated presidential election.

Summary

Stocks wrapped up October on a negative note, as last week delivered a series of important economic data points. The October jobs report showed the slowest hiring pace since 2020, while PCE inflation was in line with expectations, reflecting progress on the inflation front. Personal income, spending, and saving data showed steady growth, and Q3 GDP indicated that the U.S. economy expanded at a 2.8% annualized rate, largely driven by consumer and government spending. The ISM Manufacturing Index continued to show contraction, marking the seventh straight month of decline. However, consumer confidence saw a significant rebound in October, offering a positive counterpoint amid mixed economic signals as we head into November.

We appreciate your continued trust.

Thank you,

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

The information contained herein is general in nature. It does not take into account your particular investment objectives, financial situation, or needs. It is provided for illustrative or informational purposes only, and should not be construed as advice. Our advisors can meet with you to discuss your retirement plan.

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