weekly market update 11/8/2024

A surprisingly quick and decisive presidential election outcome powered the S&P 500 to its best weekly return since November 2023, as the removal of political uncertainty fostered animal spirits and investors piled into anything perceived to be part of the “Trump trade”.  As a result, the S&P 500 finished the week at all-time highs, up over 4.5%, and briefly eclipsed 6,000 for the first time ever. The US small-cap index, the Russell 2000, was a notable outperformer rising over 8.5% on the week, its best week in more than four years.

Heading into the end of the year we remain constructive, but markets have a lot of crosswinds to digest.  On one hand, Trump is seen as good for economic/earnings growth due to the prospects for deregulation as well as growing odds of corporate tax cuts as a GOP sweep of Congress is increasingly likely.  The renewal of the 2017 tax cuts also appears to be less of a concern now. On the other hand, tariff threats and potential immigration policies create uncertainty around global trade and inflation while a GOP sweep might have fiscal deficit implications.

However, the path of least resistance remains higher as seasonality is very favorable into year-end, with November-January the best three-month period of the year for stocks (per FactSet). Furthermore, recent earnings have been solid while macroeconomic data such as consumer sentiment came in at its highest levels in six months and green shoots are emerging from China with exports rising to their highest levels in more than two years.  Very rarely do Federal Reserve meeting announcements become an afterthought, but the Fed cut interest rates again on Thursday.  Ultimately, stocks have shown an uncanny ability to trend higher regardless of politics (see chart below from Ritholtz Wealth Management).

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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