Week in Review: November 22, 2024

November 25, 2024

Recap & Commentary

Markets ended the week higher as investors evaluated President-elect Trump’s various cabinet nominees and a number of retailers reported 3Q24 earnings.

Donald Trump’s election victory produced a knee-jerk reaction in which markets rallied on the general idea that his second term will be marked by lower taxes and less regulation. However, over the past two weeks, markets have become more discerning as they evaluate Trump’s various cabinet-level nominees in an effort to determine how those individuals might influence policy measures. For example, after Trump nominated Robert F. Kennedy Jr. to lead the Department of Health and Human Services (HHS), biotech stocks, in particular vaccine makers, sold off given Kennedy’s well-known skepticism regarding the safety and efficacy of vaccines.

On Friday, Trump nominated hedge fund manager Scott Bessent to be the next Treasury Secretary. Bessent has previously advocated for extending the tax cuts contained in the Tax Cuts and Jobs Act of 2017 as well as addressing the debt and deficit spending. Markets will be keen to see how Bessent plans to address those two, arguably diametrically opposed, objectives.

Earnings reports by a number of retailers have painted a generally upbeat picture of the American consumer with at least 10 retailers raising their sales or earnings guidance for the current fiscal year to reflect solid consumer spending. Target, however, seems to be an exception, reporting disappointing results and a weaker-than-expected holiday outlook driven be weaker demand for discretionary items such as home goods and apparel. The stock fell 21% following its earnings report, its largest single-day decline since May 2022.

Economic Commentary

Consolidated business activity rose to a 31-month high in November, according to industry group S&P Global, fueled by the services sector which expanded at its fastest pace in 32 months. Manufacturing activity continued to contract, albeit at a slower pace than in October. According to S&P Global, “Firms’ expectations of output in the coming year rose to the highest since May 2022, attributed to the prospect of lower interest rates, improved economic growth, and more supportive business policies from the new administration in 2025.” Notably, employment fell for a fourth consecutive month.

Housing data continued to point to mixed conditions as housing starts fell 3.1% in October while existing home sales rose 3.4%. Compared to a year ago, existing home sales rose 2.9%, the first year-over-year increase since July 2021.  The median price for existing home sales rose 4.0% from a year ago to $407.2K.

Consumer sentiment rose for the fourth consecutive month, though the gain was less than economists had expected. On the surface the change in the headline number was relatively small, however, beneath the surface major swings occurred based on political affiliation. Whereas previously, Democrats generally had a more favorable view of the economy, following the election, sentiment on the part of Republicans surged while sentiment among Democrats plunged. Regardless of sentiment, consumer spending has remained resilient.

Of Note

Through Friday, 95% of S&P 500 companies had reported 3Q24 earnings. Thus far, 75% have beaten their consensus estimate. According to industry group FactSet, consolidated earnings growth for the quarter is expected to be 5.8%.

Market Indices   (As of 11/22/2024)

• Core PCE Inflation
• New Home Sales
• Pending Home Sales
• Personal Income & Spending
• Consumer Confidence
• Durable Goods Orders
• Weekly Jobless Claims