Week in Review: November 29, 2024

December 2, 2024

Recap & Commentary

Markets ended the week higher with the S&P 500 and Dow Jones Industrial Average both ending at new record highs. Additional nominations for Trump’s incoming administration, the release of the Fed’s November FOMC meeting minutes, and a bevy of economic reports vied for investors’ attention.

Reigniting fears of a trade war, Trump announced his intentions to impose 25% tariffs on imports from Mexico and Canada and an additional 10% tariff on top of existing tariffs for Chinese goods. Such tariffs could have an impact on a number of US industries, including autos.

The release of the minutes from the Fed’s November FOMC meeting contained no real surprises. Committee members “judged that though, month-to-month movements would remain volatile, incoming data generally remained consistent with inflation returning sustainably to 2%.” Regarding the labor markets, members generally noted that “there was no sign of rapid deterioration.” Market expectations for another 0.25% rate cut at the Fed’s upcoming December meeting ended the week at 64%.

One notable development during the week was a brief re-inversion of the yield curve. Often considered a harbinger of recession, the yield curve first inverted in July 2022 as the Fed aggressively raised rates to fight inflation, boosting short-term rates above long-term rates which declined on concerns of a looming recession. In September of this year, the curve disinverted as the Fed began to cut short-term rates, while longer-term rates moved higher on expectations of stronger economic growth and concerns of continued deficit spending moving forward. This past week the 10-Year Treasury yield fell 0.23% in part due to Trump’s nomination of Scott Bessent, a fiscal conservative, who is expected to prioritize market stability and economic growth. The decline pushed the 10-Year Treasury back below the 2-Year Treasury yield.

Economic Commentary

Core PCE inflation, the Fed’s preferred inflation measure, rose 2.8% in October from a year ago, inline with expectations and up from September’s 2.7% pace. In April, core PCE stood at 2.9%. Though markets are still anticipating another Fed rate cut in December, with disinflation having largely stalled the Fed could grow more cautious in the months ahead without inflation resuming a downward trajectory towards 2%.

New home sales plunged 17% in October to their lowest level since November 2022, weighed down by a recent jump in mortgage rates and record high prices, which saw the median price rise 4.7% from a year ago to $4373K. In contrast to new home sales, pending home sales rose for the third consecutive month, reaching their highest level since March.

Personal incomes rose 0.6% in October, the largest monthly increase since March. At the same time spending rose 0.4%, led by spending on services.

Durable goods orders increased 0.2% in October; however, a core measure of business spending fell 0.2%, possibly due to uncertainty regarding the election leading companies to delay purchases until after the outcome was decided.

Of Note

Since 1950, December has historically been the second-best month of the year for the S&P 500 which has recorded a monthly average gain of 1.5%, trailing only November’s average monthly gain of 1.9%.

Market Indices   (As of 11/29/2024)

• Nov. Employment Report
• ISM Manufacturing & Services
• JOLTs Job Openings
• Consumer Sentiment
• Weekly Jobless Claims