Market Monitor: November Mid-Month Update
Headlines and Highlights
- Market rises on Trump victory, GOP sweep: U.S. stocks soared following Donald Trump’s triumph in the presidential election on expectations of deregulation and tax cuts along with relief at a clear and unchallenged outcome. The small-cap Russell 2000 surged 6% the day afterward, leading all asset classes amid perceptions that domestic-focused companies will be largely insulated from tariffs and trade strife. Republicans winning control of both the Senate and House added to markets’ optimism about pro-growth prospects. The S&P 500 has gained 4% in November and 26% year-to-date while the small-cap index is up 16% in 2024. International stocks fell as U.S. election results fueled the dollar’s rise against foreign currencies.
- Inflation edges higher: The Consumer Price Index rose slightly last month for the first time since March, extending its bumpy final path toward the 2% target. Consumer prices increased 0.2% in October for an annualized rate of 2.6%, up from 2.4% in September. Core CPI, excluding volatile food and energy costs, held at 3.3%. Housing-related inflation, which remains stubborn but is expected to ebb in coming months, accounted for half the monthly rise.
- Economy approaching year-end in solid shape: The U.S. economy is heading into the home stretch of 2024 in healthy condition, buttressed by data showing the labor market holding up and consumers in spending mode as the holidays near. Applications for unemployment benefits fell to the lowest level since May, and retail sales rose a better-than-expected 0.4% in October alongside surveys showing consumer sentiment rising to a seven-month high. The Atlanta Fed projected fourth-quarter GDP growth at 2.5%.
Chart of Interest
Second-half comeback: Small-cap stocks have outperformed large caps since midyear.
Sources: Morningstar, Altair Advisers
Our Views
- The bull market in U.S. stocks is still young relative to history at two-plus years and we believe conditions favor it extending through the months ahead. The tech giants that have fueled the run-up anticipate strong returns from their AI investments. The rally’s broadening to smaller companies and different sectors bodes well for further advances.
- Inflation’s generally downward trend, despite a hiccup in October, enables the Federal Reserve to continue making planned quarter-point reductions to the benchmark interest rate through 2025. Tariffs, a trade war with China or geopolitical strife that disrupts the global supply chain could cause inflation to reignite.
- The U.S. economy appears well-positioned for strong growth into 2025. Besides consumer spending and the labor market holding firm, robust corporate earnings – higher in each of the past five quarters and expected to rise further next year – underpin the positive outlook.
- The global economy stands to benefit from declining interest rates and inflation in the year ahead. Lower rates should increase economic activity and help stimulate growth by making borrowing less expensive.
- Policy prospects from a second Trump administration should help the stock market’s momentum continue and provide new opportunities in varying areas of the market. Certain areas expected to benefit may not follow through unless policy initiatives are ultimately enacted. Potentially negative repercussions from planned tariffs and a likely trade war with China are concerns.
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