This week, there was limited dispersion across markets for the second consecutive week despite the volatile response to economic data. The Russell 2000 slightly outperformed the S&P 500, while the Nasdaq and international stocks were flat. Underneath the surface, factor trends saw Momentum, Value, and Equal Weight outperform the S&P 500. Notably, the Magnificent 7 underperformed, dragging down the Growth factor and Tech sector. Sectors experienced significant dispersion. Energy gained +5.8% as oil prices rose, with the Material and Industrial sectors close behind. Bonds ended the week with modest gains despite the round trip in Treasury yields.

The S&P 500 currently trades at over 21 times its next 12-month earnings estimate, a level not seen outside of periods like the late-1990s tech boom and the recent post-COVID recovery, when interest rates were near zero. Why do high valuations matter? History shows that while valuations have a limited impact on short-term returns, they play a critical role in determining long-term performance.

This week, the stock market traded higher in a shortened week. The Large size factor marginally outperformed, with the Nasdaq and S&P 500 gaining +1% and +0.8%, respectively, compared to the Russell 2000's +0.3%. The Fed's December meeting minutes contributed to the rise in the back end of the Treasury yield curve, with officials noting still-elevated inflation, strong consumer spending, and solid labor market dynamics.

There was no shortage of market-moving events in Q4. The stock market opened the quarter with a slow start in October, but the presidential election's outcome triggered a broad rally in November. The rally faded as the year ended, although the S&P 500 traded only a few percentage points below its all-time high. The credit market was equally active in Q4, with the Federal Reserve cutting rates by another -0.50%. However, the major development was the changing 2025 outlook. Both the Fed and the market expect fewer rate cuts in 2025 compared to the end of Q3, which resulted in a sharp rise in Treasury yields in Q4.

This week, the Federal Open Market Committee (FOMC) concluded its final monetary policy meeting of 2024 by lowering the federal funds rate by 0.25 percentage points to a range of 4.25%-4.50%. This was the third consecutive rate cut, reducing the benchmark short-term rate by a full percentage point over the year. While the rate cut was widely anticipated, the central bank adopted a more hawkish outlook than Wall Street had expected, scaling back its 2025 rate cut projections from four to two. This cautious approach likely reflects the sticky inflation readings this fall, which showed a modest uptick in price growth.

The past two years have been remarkable for investors, with the S&P 500 posting back-to-back gains of over +20%. The chart below looks at 2024’s price movement and uses yellow shading to mark the days when it closed at an all-time high. Since late January 2024, the S&P 500 has set over 50 new highs this year.

This week, the Bureau of Labor Statistics released the latest inflation data, following recent updates on consumer and producer prices. While November's consumer price index (CPI) and producer price index (PPI) largely met expectations, both showed persistent upward pressure, disappointing Wall Street. We anticipate the Federal Reserve will respond by lowering short-term interest rates at its December 17-18 meeting, likely by 25 basis points to a range of 4.25%-4.50%.

The US presidential election results fueled November’s stock market rally as investors focused on the incoming administration’s policy agenda and its implications. With Republicans taking control of the White House, Senate, and House in January, the following section discusses key policy areas to watch and potential market and economic impacts.

This week, the Dow Jones Industrial Average has risen 1%, bringing its November gains to over 7%—its strongest monthly performance since November 2023. Meanwhile, the broader S&P 500 Index and the tech-focused Nasdaq Composite have gained 0.5% and 0.4%, respectively. Recent sentiment suggests the central bank might pause rate hikes again as the economy maintains strong growth, potentially reigniting inflation. However, we anticipate the Federal Reserve will lower the benchmark short-term interest rate by 0.25% at the December FOMC meeting, concluding on December 18, likely postponing a federal funds rate pause until 2025.

The SECURE 2.0 Act contains strong tax credits for small businesses that start retirement plans (401(k), SEP or SIMPLE IRAs). These credits reduce costs substantially, making retirement benefits possible for small employers.

This week, the US stock market experienced a positive week, with the S&P 500 rising 1.8%, recovering from last week’s decline. Economic data releases included the S&P Global US Composite PMI, indicating that business activity expanded in November and existing home sales rebounded, showing a monthly increase of 3.5% The market remained cautious about geopolitical tensions, but strong earnings and expectations of a stable economic outlook supported the overall sentiment.

This week, the stock market remained relatively flat following election-driven gains from the previous week. The S&P 500 posted a modest decline, while the Russell 2000 fell nearly 2%, a sharp contrast to its 8.6% surge last week. Remarks from Federal Reserve Chairman Jerome Powell sparked concerns that the central bank may take a more cautious approach to cutting short-term interest rates. Additional inflation data is expected before the Fed’s mid-December policy meeting.

The election is over, and global markets are analyzing the outcome and starting to adjust portfolios. Republicans are set to control the White House, Senate, and House. As a result, investors are looking to Trump’s first term as a roadmap for how this administration’s policies may impact markets.

Stocks traded higher this week, with most of the gains occurring after the election. The S&P 500 reached a new all-time high, nearing the key 6,000 level. The broader equity market rally was notable as investors priced in the Trump administration’s pro-growth, reflationary policies. The past few weeks have been packed with market-moving events, but the calendar is expected to settle down as we approach year-end.

Stocks finished October lower as investors navigated Q3 earnings, the upcoming election, and uncertain Federal Reserve policy. Treasury yields climbed as investors considered the possibility that the Fed may not cut interest rates as much as previously expected. Concerns about fiscal spending also drove Treasury yields higher, with expectations for continued high government spending regardless of the election outcome.

This week, stocks traded lower after several weeks of consistent gains. The S&P 500 dropped -0.5%, underperforming the Nasdaq 100's +0.3% gain but outperforming the Russell 2000's -2.8% return. The Magnificent 7 rose over +2%, making Growth the only factor to trade higher. The next two weeks are filled with market-moving events, and once they pass, stocks could rally into year-end.

This week, the S&P 500 reached a new all-time high, bringing its year-todate count to nearly 50. The index's gains were led by a unique combination of sectors, with Utilities, Financials, and Real Estate each gaining over +3%. The Magnificent 7 underperformed the index, with factor returns hinting at a market rotation.

The economy is in uncharted territory. The Leading Economic Index (LEI), which tracks ten data points that tend to change before the overall economy does. Economists monitor the LEI because it includes data that can provide insight into future economic activity, such as unemployment claims, building permits, and manufacturing hours worked. A rising LEI signals improving economic conditions, while a declining LEI suggests worsening conditions.

Stocks ended the week slightly higher, driven by Large Cap Growth, while Equal-Weight, Value, and Small Caps lagged. Bonds traded lower as yields rose, with longer-duration bonds underperforming. Market sentiment remains volatile, with investors shifting between mega-cap growth stocks and this year's weaker performers..

In the third quarter of 2024, the Federal Reserve made its first interest rate cut of the cycle, reducing rates by 0.50%. This move was driven by rising unemployment, reaching a 33-month high, and inflation returning to target levels. Despite market volatility, including a sharp sell-off in August, equities finished the quarter higher. The S&P 500 achieved its fourth consecutive quarterly gain, approaching record highs by the end of September.