Your Monthly Market Newsletter, December 2024

As we enter the final month of 2024, there is much to reflect on in November. Earlier in the month, former President Donald Trump was re-elected as the 47th U.S. president, which fueled investor optimism and led to a stock market rally that extended through November. All three major indices – the Dow Jones, S&P 500, and Nasdaq – each gained more than 5.0% for the month, with the S&P 500 and Dow Jones earning their largest one-month gains of the year.

In November, the Federal Reserve (Fed) cut interest rates by 0.25 to a range of 4.5% to 4.75%. However, economists seem less confident that another rate cut will occur in December, as initially expected. The Fed may exercise caution in continuing to lower interest rates into 2025 as progress on inflation stalled in its downward trajectory toward the Fed’s 2% target rate. The Consumer Price Index (CPI) rose 0.2% for the third consecutive month in October to 2.6%, while the Personal Consumption Expenditures Index (PCE) came in at 2.3%, or 0.2% higher than in September. Despite the inflation rate remaining higher than the Fed prefers, consumer confidence has rebounded in recent months thanks to growing optimism about the labor and stock markets. November’s Consumer Confidence Index came in at 111.7, an increase from 109.6 points in October, the highest since July 2023.

Consumers appear to be feeling the holiday spirit - the average American is expected to spend more than $1,000 on holiday purchases this season, up 7.9% from 2023. Though the holidays bring a host of gatherings and festive memories, inflation continues to push prices higher, causing many to feel stressed about their finances this time of year. Having a solid financial plan can help ease that stress. Before hitting the stores, take time to create a spending budget, build a list of items to buy, and research the best deals. Already completed your holiday shopping? Experian offers several tips to help pay off any debt and get ahead on planning for next year.

If you need assistance creating a holiday spending plan, have any concerns about current economic conditions, or need to chat about changes in your financial situation, give us a call. We’re here to help. Sending our warmest wishes to you and your loved ones for a joyous holiday season!

Stocks

November ushered in a feast for investors and foodies alike as equities soared, rebounding from losses posted in October. All three major U.S. equity indices were up at least 5.0% for the month, with the blue-chip Dow Jones Industrial Average leading the way. Investors celebrated the continued downward shift in inflation and interest rates, strong company earnings, and the potential for lower taxes and regulations under a second Trump administration. The rally in stocks was largely broad and covered several sectors. Small and mid-sized companies also posted strong returns in November as the rally began to include a wider equity market share.

Sector Performance

Every sector notched a positive return in November. The strongest performing sectors were Consumer Discretionary, Financials, and Industrials, all driven by the potential for growth under the incoming administration. With its robust performance, Financials has emerged as the top year-to-date performer, surpassing Technology and Communication Services. Additionally, strong earnings in sectors such as Industrials left investors with generally positive returns from most corners of the market. Health Care was the only sector with returns below 1% due to shifting investor sentiment and uncertainty on how changing policies will impact healthcare companies.

Bonds

Bonds also joined the Thanksgiving rally as the Federal Reserve cut interest rates, with observed interest rates showing mixed movements. The two-year and 10-year Treasury yields fell by three and 12 basis points, respectively. Given the inverse correlation between bond prices and yields, the decline in yields typically supports price increases. Fixed-income investments made a small positive return in November. Robust economic data, consumer optimism for accelerated growth, and concerns about potential inflation under the Trump administration influenced market dynamics during the month.

Economic Update

Economic data continued to show remarkable resilience in November. Inflation measures remained stubbornly above the Federal Reserve’s 2% target, with the Consumer Price Index rising by 2.6% and the Personal Consumption Expenditures Index coming in at 2.3%, indicating moderating prices at a slower rate. The “second” estimate of GDP for the third quarter of 2024 came in at 2.8%, which was in line with expectations and at a hotter-than-normal annualized pace. The reading was primarily driven by increased consumer spending and non-residential fixed investment. The labor market report showed that the economy added 12,000 jobs in October, much less than expected. However, the number of people who indicated they missed time because of extreme weather was at an all-time high, as the effects of Hurricanes Milton and Helene may have skewed October’s data. Altogether, these indicators reflect the economy's resilience and continued economic expansion driven by domestic consumption of services.

Researchers Explore Physical Activity's Impact on Brain Health

Physical activity has several health benefits, such as improving cardiovascular and mental health. Exercise can have positive benefits for our brains as well. Scientists have found that physical activity protects the brain against neurodegenerative diseases like Alzheimer's, cognitive impairment, and other forms of dementia. Regular moderate to vigorous physical activity can increase brain matter and is linked to a reduced risk of dementia as we age. In contrast, loss of brain volume is an indicator of neurodegeneration.

Researchers from Canada and the United States recently conducted a study further exploring how physical activity relates to brain matter volume. The study followed more than 10,000 people ranging in age from 18 to 97, roughly 50% male and 50% female. The participants underwent brain MRI scans and responded to a health questionnaire that included questions asking whether they participated in moderate or vigorous physical activity for at least 10 minutes a day. The results of their brain scans were analyzed along with their self-reported activity information.

The study found that participants who reported moderate or vigorous physical activity had significantly larger volumes in multiple regions of the brain than those who were not active. However, there was no significant difference in brain matter size between those reporting moderate and vigorous activity levels, indicating that higher-intensity workouts aren’t necessary to reap healthy brain benefits. Even more interesting, the study proved that any physical activity benefits the brain. Though many people strive to meet the common health recommendation to walk 10,000 steps each day, many of the participants did not meet this guideline, yet their MRI scans still showed they had larger brain matter volume compared to those who were inactive.

If you don’t exercise regularly, it’s never too late to start a routine! For further details on this interesting study, read here.

THOUGHT FOR THE MONTH

^{Index Definitions}

^{Dow Jones Industrial Average:The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.}

^{Dow Jones U.S. Real Estate Total Return Index:The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.}

^{NASDAQ Composite:The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.} 

^{S&P 500 Bond Index:The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.}

^{S&P 500 Consumer Discretionary:The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.}

^{S&P 500 Consumer Staples:The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.}

^{S&P 500 Energy:The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.}

^{S&P 500 Financials:The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.}

^{S&P 500 Index:The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.}

^{S&P 500 Utilities:The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.}

^{S&P U.S. Aggregate Bond Index:The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.}

^{S&P U.S. Treasury Bond Index:The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.}

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