Your Weekly Update for Monday, November 11, 2024.
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Mike Elerath
CERTIFIED FINANCIAL PLANNERTM
CERTIFIED IN LONG-TERM CARE
[email protected]
Bill Roller
NMLS #107972
CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
[email protected]
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Today is Veterans Day! The stock market is open, but banks and the bond market are closed. There is no mail delivery.
Click on the image below to go to https://youtu.be/sOSHEJZHy4I to see the video from November 8 in which Mike Elerath, Bill Roller, and Keller Williams Realtor Michael Harding discuss the financial markets and Clark County real estate.
Please give the video a âLikeâ and check out other videos and subscribe to the channel at https://www.youtube.com/@beaconrwa.
Summary
Markets were UP bigly last week. The Dow Jones Industrial Average was UP 4.63% to 43,998.73 while the S&P500 ended UP 4.67% to 5,996.62. The Nasdaq Composite ROSE 5.76% to 19,290.49. The annual yield on the 30-year Treasury FELL 8.1 basis point(s) to 4.477%.
Economic news for the week included the U.S. Federal Reserve cutting the Fed funds rate by another quarter-point. In terms of data, ISM services ticked higher, remaining in strong expansion, and productivity saw gains in Q3, although labor costs rose as well.
U.S. stocks gained ground for the week following the conclusion of the Presidential election, while foreign stocks saw mixed results. Bonds fared positively as yields pulled back from recent highs. Commodities were mixed, with gains in energy offset by a decline in metals.
Economic Notes
(0) The FOMCÂ unanimously voted to cut rates by a quarter-percent to 4.50-4.75%, although the future path of rate hikes has become cloudier since the election, with the formal FOMC statement language little changed. At the post-meeting press conference, Chair Powell noted the economy has made significant progress towards its goals over the last two years. Inflation itself was asked aboutâthe persistent 2.7% trailing 12-mo. core PCE figure in particular. Powell noted the annualized pace of more recent months being far lower, in the low 2âs, as inflation readings for non-housing services/goods prices have fallen back to levels seen under prior 2%-ish inflation regimes. Housing remains the measurement problem, though, particularly in capturing the effects of new leases. Inflation expectations were noted as being well-anchored, which is a future-looking metric the Fed tends to find important. Economic growth was acknowledged as stronger since the last meeting. He also reiterated the importance of the Fed not being on a âpre-set course,â but everything is reviewed meeting to meeting with a goal of âmaking sensible decisionsâ as they go, but that theyâre on a âpathâ to a much more âneutral stance.â It wasnât quite a declaration of victory, but perhaps as close as the Fed gets to that. The data dependency may also seem obvious, but the Fed feels the need to clarify it, especially to take away too much expectation baked into Fed funds futures markets, which can go out a year or more, during which a lot can change in either direction.
While refusing to comment on the election results specifically, in regard to new policies, he reiterated theyâll have âno effectâ on near-term decisions, as nothing concrete is yet assembled. As Powell put it in regard to the difficulty in forecasting, âWe donât guess, we donât speculate, and we donât assume,â noting the wide range of possible outcomes of legislation that could eventually be passed. However, this could represent a time of greater uncertainty looking forward, which takes away their willingness to put out more specific forward guidance. He did note that as policies are formalized, impacts would be added to their internal models, which do help educate FOMC members on their policy decisions. Powell conjectured that higher long-term Treasury yields are likely more a matter of stronger growth and lessened downside risks rather than higher inflation fears, although he reminded watchers again that the Fed doesnât comment on current or future fiscal policy options (in response to a question about higher deficits being a possible cause of higher bond yields). Lastly, the response was curt when asked about whether he would resign if asked (ânoâ) or if any Fed committee members could be fired or demoted at will (ânot permitted under the lawâ).
(+) The ISM services/non-manufacturing index rose 1.1 points to 56.0 in October, above the expected decline to 53.8. This remains in expansion, in fact the fastest pace in several years. Within the index, new orders and business activity each fell back by 2-3 points but remained solidly in expansion at levels over 57. On the other hand, employment rose by nearly 5 points back into expansion at 53. Prices paid fell by a point to a still-expansionary 58, while supplier deliveries rose 4 points to 56. From anecdotal commentary, a variety of respondents noted a negative impact from the hurricanes and port strikes, although the latter were short-lived. From another provider, the S&P Global U.S. Services PMI fell by -0.3% to 55.0 in its final reading for October. In short, the service sector continues to remain in expansion and represents the largest part and key driver of the economy, sustaining the current soft landing by offsetting the persistent negativity in manufacturing.
(+) The preliminary Univ. of Michigan index of consumer sentiment for November rose by 2.5 points to 73.0, beating expectations of a minor increase to 71.0. While assessments of current conditions fell by a half-point, expectations for the future rose by over 4 points. Inflation expectations for the coming year fell a tenth of a percent to 2.6%, while those for the next 5-10 years rose a tenth to 3.1%. The survey cutoff occurred on Nov. 4, so just missed the election, with anecdotal commentary in reaction to that was limited.
(+) The preliminary nonfarm productivity report for Q3 showed a 2.2% annualized increase, a bit below the 2.5% expected and just above the 2.1% of Q2. However, the year-over-year productivity pace decelerated by -0.4% to 2.0%, including revisions. Interestingly, productivity has grown at a similar rate of 1.8% since Q4 of 2019, just before the pandemic. Unit labor costs (defined as compensation divided by output) rose at an annualized 1.9% for Q3, nearly double the expected pace, but below the 2.4% rate of the prior quarter. For the trailing 12 months, unit labor costs ticked up by 0.2% to 3.4%. Compensation per hour fell by -0.3% to an annualized rate of 4.2% in the quarter, while the year-over-year measure declined by -0.2% to 5.5%. Revisions for the past year resulted in an upward push in unit labor costs, which is considered inflationary, so runs counter to the Fedâs easing efforts.
(-/0) Initial jobless claims for the Nov. 2 ending week rose by 3k to 221k, just below the expected 222k. Continuing claims for the Oct. 26 week rose by 39k to 1.892 mil., above the 1.873 mil. median forecast. It appeared that some auto sector layoff activity in the Great Lakes region offset a drop back towards normal in recent hurricane-affected states in the South.
Market Notes
| Period ending 11/8/2024 | 1 Week % | YTD % |
| DJIA | 4.61 | 18.50 |
| S&P 500 | 4.69 | 27.17 |
| NASDAQ | 5.76 | 29.25 |
| Russell 2000 | 8.61 | 19.72 |
| MSCI-EAFE | 0.07 | 7.07 |
| MSCI-EM | 1.21 | 13.30 |
| Bloomberg U.S. Aggregate | 0.78 | 2.20 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2023 | 5.40 | 4.23 | 3.84 | 3.88 | 4.03 |
| 11/1/2024 | 4.61 | 4.21 | 4.22 | 4.37 | 4.57 |
| 11/8/2024 | 4.63 | 4.26 | 4.20 | 4.30 | 4.47 |
U.S. stocks were little changed in the early part of the week, before the results of Tuesdayâs general election. The strong Republican showing resulted in a strong rally starting Wednesday, with votes still being counted to determine the composition of the House and possible red sweep. The general hope for markets with this political arrangement is lower corporate taxes, a light-touch regulatory environment, and stronger upcoming earnings growth. The ends of election seasons have also tended to prompt a ârelief rallyâ of sorts historically. The FOMC rate cut was icing on the cake, although expectations for next year have become less dovish. Small caps fared especially well, as would be expected in such an environment.
Every S&P 500 sector saw a gain last week, with more cyclical groups leading with returns of well over 5%, including consumer discretionary, energy, industrials, financials, and technology; laggards included the lower-beta defensive group of consumer staples, health care, and utilities. Real estate also rose several percent along with lower interest rates.
Foreign stocks were little changed on net, with slight gains in Japan offset by weakness in Europe and the U.K. Aside from disappointing earnings, there has been rising concern in Europe surrounding proposed detrimental trade policy/tariffs in the next U.S. administration, adding to already challenging slow economic growth conditions on the continent. This was highlighted by Germany moving up their planned election by six months. The Bank of England cut rates by a quarter-percent to 4.75%, though it was a bit hawkish in language noting potentially higher inflation in the next year due to the U.K. budget. The Bank of Sweden dropped rates by a half-percent along with sluggish economy and slowing inflation concerns, while the central bank of Norway kept rates unchanged. Emerging markets were also mixed, as markets digested the impacts of the election on individual countries, through trade, currency impacts, and U.S. re-shoring efforts away from China.
Bonds fared well as yields moderated from the prior week, led by high yield and investment-grade corporates, which outperformed U.S. Treasuries. The 10-year Treasury yield fell back a bit on the week but remains well above the lows for the year of 3.6% in mid-September. Foreign bonds were mixed, with the U.S. dollar higher.
Commodities were mixed last week with stronger agriculture and energy, offset by softer industrial and precious metals. Crude oil prices rose about a percent last week to $70/barrel, along with hopes for a more accommodative petroleum environment in the U.S. but tighter sanctions on several other producers, like Iran, although supply and demand continue to see mixed influences.
Mortgage Rates
âMortgage rates continued to inch up this week, reaching 6.79 percent,â said Sam Khater, Freddie Macâs Chief Economist. âIt is clear purchase demand is very sensitive to mortgage rates in the current market environment. As soon as rates began to rise in early October, purchase applications fell and over the last month have declined 10 percent.â
The 30-year FRM averaged 6.79 percent as of November 7, 2024, up from last week when it averaged 6.72 percent. A year ago at this time, the 30-year FRM averaged 7.50 percent.
The 15-year FRM averaged 6.0 percent, up from last week when it averaged 5.99 percent. A year ago at this time, the 15-year FRM averaged 6.81 percent.
Freddie Macâs Primary Mortgage Market SurveyÂŽ is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Mortgage Window, Inc. Â (NMLS#2485156) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | $81,885.62 | 2.61% | 19.05% | $1,619,760,116,397 | $79,412,121,167 |
| ETH | Ethereum | $3,151.67 | -1.77% | 27.93% | $379,536,209,969 | $45,146,255,666 |
| SOL | Solana | $216.88 | 5.17% | 32.30% | $102,351,770,204 | $9,879,358,659 |
| BNB | BNB | $617.83 | -3.13% | 10.27% | $89,028,301,731 | $2,951,687,349 |
| DOGE | Dogecoin | $0.28 | 14.79% | 81.05% | $41,782,347,712 | $18,756,812,349 |
| XRP | XRP | $0.58 | -4.75% | 13.30% | $32,915,944,695 | $3,743,021,048 |
| ADA | Cardano | $0.59 | -5.15% | 79.15% | $20,801,087,678 | $3,971,051,143 |
| SHIB | Shiba Inu | $0.00 | -2.13% | 48.25% | $14,929,548,070 | $6,094,789,176 |
| TRX | TRON | $0.16 | -0.73% | 0.09% | $14,241,686,682 | $724,385,661 |
| TON | Toncoin | $5.28 | -2.75% | 8.87% | $13,431,363,975 | $602,175,478 |
| AVAX | Avalanche | $32.08 | -1.35% | 36.06% | $13,065,926,295 | $1,110,436,156 |
| SUI | Sui | $3.20 | 8.24% | 68.51% | $9,118,182,823 | $3,300,050,826 |
| LINK | Chainlink | $13.94 | -5.17% | 31.66% | $8,737,967,112 | $894,799,572 |
| BCH | Bitcoin Cash | $433.46 | -3.57% | 28.02% | $8,576,865,651 | $859,000,282 |
| DOT | Polkadot | $5.12 | -3.57% | 34.83% | $7,767,188,693 | $962,626,274 |
| NEAR | NEAR Protocol | $5.23 | 7.91% | 42.01% | $6,369,236,665 | $1,369,213,656 |
| APT | Aptos | $11.92 | 9.07% | 45.59% | $6,198,746,869 | $877,176,457 |
| LTC | Litecoin | $76.60 | -1.79% | 14.85% | $5,759,121,260 | $799,504,668 |
Information current as of 5:55 AM PST, Monday, November 11, 2024. Source: https://coinmarketcap.com
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Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management,
MarketfieldAsset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poorâs, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.