WEEKLY MARKET UPDATE 10/25/2024

After registering six consecutive weeks of gains the S&P 500 took a breather this week and declined 1%.  There were no clear catalysts for the decline, but election uncertainty remains an overhang and next week the third quarter S&P 500 earnings season heats up with over a third of the index reporting, including highly anticipated results from Apple, Microsoft, Alphabet, Microsoft, and Amazon.  Thus far the Q3 earnings season, which is 37% complete, has mostly come in as expected, but S&P 500 is trading at 21.7 forward earnings, which is rich compared to 5-year (19.6) and 10-year (18.1) averages (per FactSet).  Interest rate movements in the aftermath of the Federal Reserve cutting short-term rates in mid-September are also coming under some scrutiny.  Next week will be busy as the flood in earnings reports will coincide with a variety of important economic data ranging from Q3 GDP, PCE inflation, and the October employment report.

HOUSING SALES REMAIN STAGNANT

Despite the Federal Reserve recently announcing short-term interest rate cuts, existing home sales in September fell to their slowest monthly rate since October 2010.  Many had hoped that rate cuts would reinvigorate housing market activity, but mortgage rates have actually climbed since the Fed’s September 18th interest rate cut announcements (see chart below) and housing sensitive companies such as Sherwin Williams (paint) and PulteGroup (homebuilder) highlighted continued weakness during their recent earnings reports.  As a result, home sales for 2024 are on track for the worst year since 1995, per the National Association of Realtors, as affordability remains a huge issue and election uncertainty coupled with seasonal headwinds weigh on prospective buyers.

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

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