November 11, 2024

Happy Veterans Day! 

What a week.  As I write these words, Trump is being declared winner in Arizona, completing a sweep of swing states. As such, there is much to talk about in terms of impact today, but, first the numbers. The S&P 500 jumped 4.72%, the Dow Jones Industrial Average also finished up 4.72%. The Nasdaq rocketed up 5.85%. Internationally, markets were a bit off with the FTSE 100 dropping 1.28%, and the MSCI-EAFE was flat off a slight .07%. The 2-year Treasury closed paying 4.26% and the 10-Year yield finished at 4.31%.

As Barron’s reports in post-election commentary, Realignment. Donald Trump’s victory — and its sweeping nature — reverberated across markets last Wednesday. Stocks were higher across the board, with the blue-chip Dow Jones Industrial Average surging more than 1,500 points, or 3.6%. It’s the largest post-election day gain for the Dow since November 1896, according to  Dow Jones Market Data. The S&P 500 rose 2.5% and the Nasdaq Composite was up 3%. All three indexes closed the day at new records. The rally was largely fueled by optimism around reinvigorated growth. Republicans will control the White House and Senate, and they’re expected to retain the House once more vote counting is complete. That could ease the way for tax cuts and deregulation that drive corporate profits.

From MarketWatch, Donald Trump’s historic election victory made for a seismic week on Wall Street, as investors reshaped their assumptions about the economy, interest rates, and international relations. Needless to say, the election outcome didn’t just wrong-foot pollsters, who were largely looking for a dead heat. It also appeared to catch investors by surprise, even though so-called Trump trades — bets on assets expected to benefit from a victory by the Republican nominee — had been gaining ground since October. “The Trump win happened to work in the same direction as the economic fundamentals,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, told MarketWatch. The economy appears to be headed either for a soft landing, in which growth slows but employment remains fairly solid, or even avoiding a “landing” altogether, Christopher said. That has had the same effect on the market as the Trump trade — higher bond yields and higher stock prices as investors factor in a growing economy, and a stronger dollar with the U.S. looking like the cleanest piece of laundry in a world of dirty shirts. Trump’s victory has investors penciling in stronger economic growth, partly due to expectations for tax cuts and deregulation, lifting stocks. It has also sparked fears of resurgent inflation, lifting bond yields.

The Federal Reserve cut interest rates by 0.25 percentage points as expected last Thursday to a range of 4.5 to 4.75 percent, marking its second consecutive cut after a two-year campaign of rate hikes to combat inflation. Fed Chair Jerome Powell deflected questions about President-elect Trump’s potential impact on the economy, stating, “[w]e don’t guess, we don’t speculate, and we don’t assume.” He also firmly rejected the possibility of stepping down if asked by President-elect Trump, responding with a simple “No” during Thursday’s press conference and noting it is “not permitted under the law” for a president to fire or demote Fed leaders. Powell’s term as chairman is up in May 2026, while his term as a Fed governor lasts until early 2028.

The rate decision comes as the economy shows mixed signals, with October’s jobs report showing only 12,000 new jobs added, the lowest in nearly four years, though the numbers were affected by hurricanes and the Boeing strike.

In other economic news, Initial jobless claims rose by 3,000 to 221,000 in the week ended Nov. 2, the Labor Department said last Thursday There continues to be no sign of weakening in demand for labor, economists say. One of the biggest drivers of a strong U.S. economy, worker productivity, showed another healthy gain in the summer and early fall, in a good omen for the current expansion. U.S. productivity rose at a brisk 2.2% annual rate in the third quarter, the government said last Thursday. It increased by a revised 2.1% in the prior quarter.

Growing optimism about how the economy will perform in 2025 pushed a survey of consumer sentiment to a seven-month high shortly before the election of former President Donald Trump. The first of two readings in November of consumer sentiment rose to 73.0 from 70.5 in the prior month, the University of Michigan said last Friday. It was the strongest reading since April. More striking, optimism about the economy six months from now rose to the highest level since the summer of 2021. As the election approached, Republicans became more confident about the outcome while confidence among Democrats fell, the index showed late last month.

Looking ahead, the first priority for the Republicans, which ended up with a sweep of the House, Senate, and White House, are expected to focus on using a budget process known as reconciliation to address the upcoming expiration of their 2017 tax cuts, along with other tax-policy priorities and an assertive approach on trade policy likely to be additional areas of focus. In the Equity markets, which continued the rally last Thursday, extending gains to set another fresh all-time high, a clear sign that the bull market is intact. The target for the S&P 500 is now 6,100 and may be reached soon. The election results sparked the updraft, which relieved market uncertainty about what would happen over the next four years. The takeaway is that a business-friendly, tax-reducing president is in the White House and expected to invigorate economic activity with his policies.

Now my political report card… many of you asked my predictions of which I expected a surprise landslide of 325 Electoral votes, a win of the popular vote, 5-7 Senate Seat pick up and 11 added to the house. Well, I was close, expecting Governor Younkin to pull off a miracle in Virgina (13 Electoral Votes) left me short of the 325 (312 the actual total). The Senate it looks like now 4-5 pickup and I missed a little on the House, holding on 222-205. I personally appreciate all the compliments last week, but there were many things telegraphing support for my optimism.

Anyway, let’s remember that today our Veterans made all this possible and with the grace of God we will find our way to come together and usher in a new period of American exceptionalism

Mike