The Week in Review: 11/11/2024
“There is no greater harm than that of time wasted” ~ Michelangelo
Good Morning ,
Stocks soared last week as we digested the release of a big batch of quarterly results, another rate cut from the FOMC, and the outcome of congressional and presidential elections.
The day after the election, the Dow Jones Industrial Average gained more than 1,500 points, the Russell 2000 soared 5.8%, the Nasdaq Composite surged 3.0%, and the S&P 500, with a 2.5% gain, logged its best post-election performance ever!
There was the relief factor, with participants enthused that this won't be a contested election, and there was the growth factor, with participants thinking president-elect Trump's aim to lower tax rates and decrease regulations will foster economic growth that remains above potential.
That view of policy matters manifested itself in a variety of ways…
- Small-cap stocks soared.
- Financial stocks soared.
- The U.S. dollar surged against other major currencies.
- Bitcoin prices moved noticeably higher.
- Cyclical sectors outperformed.
There were a lot of "big winners" last week. Tesla was among them, capitalizing handsomely on the idea that Elon Musk's strong support of Donald Trump will be an added bonus for the company. Shares settled 29.0% higher than the previous Friday.
Thursday's FOMC policy announcement didn't deter the market rally. The unanimous FOMC vote to cut the target range for the fed funds rate by 25 basis points to 4.50-4.75% was largely expected.
The response in equities wasn't related so much to anything the Fed Chair said about policy, but rather more about what he didn't say -- or imply. Specifically, he didn't implicitly remove the possibility of another rate cut at the December FOMC meeting.
Mr. Powell reiterated, as we thought he might, that policy is not on a preset course and that decisions will be made on a meeting-by-meeting basis.
The Fed chair seemed to be marveling at the strength of the economy and the Fed's policy settings, both of which he thinks are in a very good place. He deferred answering questions about how president-elect Trump's policy proposals might affect the Fed's decision-making, noting simply the Fed can't really model for them because it doesn't know any of the specifics yet.
As an aside, he sounded terse indicating he wouldn't resign his position if president-elect Trump asked him to and said simply that the president firing or demoting him is not permitted under the law.
In other news, NVIDIA and Sherwin-Williams replaced Intel and Dow Inc. in the Dow Jones Industrial Average starting on Friday, November 8.
Earnings remain quite robust…
Of the 91% of S&P 500 companies that have reported for Q3, 75% have beaten consensus EPS expectations. In addition, 60% have surpassed consensus sales expectations. In aggregate, companies are reporting earnings that are 4.3% above expectations, and sales that are 1.2% above expectations.
This week will be comparatively light in news and earnings compared with the flurry of reports and events over the previous two weeks. However, on the economic front, we will receive October’s CPI report on Wednesday, PPI report on Thursday, Retail Sales on Friday, and Industrial Production on Friday. Earnings season will be winding down with only a handful of companies set to report. We will hear from Disney, Home Depot, Cisco, and Tyson Foods among others.
With most of the recent major events now becoming tailwinds for equities, we expect bullish sentiment to continue through the end of the year.
To all the brave men and women who have served our country, we thank you for your service!
Banks and government services are closed today in observance of Veteran’s Day.
Have a fantastic week!!
Michael D. Hilger, CEP®
Managing Director
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