Your Monthly Market Newsletter, November 2024

As we enter November, all eyes are on the upcoming U.S. presidential election, and the state of the economy is a top concern for many voters. The U.S. economy had a strong third quarter ending in September - gross domestic product (GDP) grew 2.8%, led by increased consumer spending. The Federal Reserve (Fed)’s preferred inflation metric, the Personal Consumption Expenditures Index (PCE), rose 2.1% during the third quarter, down from 2.8% in the second quarter. As inflation continues to show signs of cooling, the Fed is expected to make another round of cuts to interest rates at its November meeting.

After strong September labor numbers, the October jobs report came in weaker than expected. According to the Bureau of Labor Statistics, October 2024 reported the smallest growth in job openings since December 2020, impacted by the effects of Hurricanes Helene and Milton on the southeast and significant labor strikes, such as the one at Boeing. Nonfarm payrolls increased by 12,000 for the month, down considerably from September and far from the Dow Jones estimate of 100,000 new jobs for October. However, unemployment remained flat at 4.1%. Federal Reserve (Fed) Chair Jerome Powell urged investors to look at the “totality of data” rather than focusing on single points, such as the monthly jobs report, when assessing the state of the economy.

One noteworthy trend in the labor market is the ongoing decline in job turnovers and quits – and ADP may have the answer. A newly released report shows that switching jobs may not be as profitable for workers as it has been in recent years. At the peak of pandemic recovery wage growth in 2022, the average worker who changed jobs received a 16.4% year-over-year increase in pay. Now, those changing jobs earn, on average, 6.2% more year-over-year, while those who stay in their jobs receive an average pay bump of 4.6%. The 1.6% difference in pay is likely not enough to motivate many workers to move on from their current positions.

The Social Security Administration announced that the cost of living adjustment (COLA) for 2025 will be a 2.5% increase. The increase helps recipients keep their expenses in line with the inflation rate and benefits about 72.5 million Americans who receive Social Security benefits and Supplemental Security Income (SSI). Recipients will receive, on average, $50 more per month starting in January 2025. The increase is more modest than last year’s 3.2% COLA.

Though inflation continues to cool, it’s a topic that’s still top-of-mind for consumers as they feel the impact of higher prices on their pocketbooks. The holiday season can be challenging for many as pricey holiday gatherings, and tempting sales and discounts can lead many to overspend. A simple trick to avoid overspending is to adopt a solid spending plan as early as possible and stick to it! By creating one now, you can enjoy the season and months afterward without the burden of financial stress, more debt, and regret. Investopedia offers these tips to help you start creating your holiday spending plan.

During this season of thanks, we hope you have much to reflect on and feel grateful for. As we approach the end of 2024, if you have any questions or need to make changes to your financial plan to help ensure you’re on the path toward achieving your financial goals for the year, please don’t hesitate to reach out. We enjoy helping folks feel more confident about their finances. Wishing you a restful and warm holiday season. Happy Thanksgiving!

Stocks

October brought more tricks than treats for investors as all three major U.S. equity indices fell, wiping out gains made earlier in the month. Rising interest rates, driven by stronger than expected economic data, led investors to become concerned about higher borrowing costs and slowing growth. Additional market volatility stemmed from uncertainties around the upcoming election, geopolitical tensions, and mixed corporate earnings, which highlighted pressures from inflation and interest rates. The prospect of the Fed scaling back its expected rate cuts in coming months added to investor apprehension. While the Fed's September rate cut initially sparked investor optimism, investors appeared concerned about the impact of prolonged rate pressures.

Sector Performance

October's equity market performance was primarily negative, with only 3 of 11 sectors posting gains as high interest rates and economic uncertainties weighed on investor sentiment. Financials and Communication Services outperformed due to strong earnings, offering reassurance of their resilience. In contrast, weaker results in Health Care pulled down the broader index as the sector grappled with regulatory and cost challenges. The interest rate-sensitive Real Estate sector also declined, facing pressure from rising borrowing costs. Overall, companies issuing positive future earnings guidance saw gains, while those lowering forecasts experienced steep declines, reflecting the market's focus on earnings expectations amid economic uncertainty.

Bonds

Fixed income assets fell in lockstep with equities in October as interest rates, which move inversely with prices, rose sharply. The yield on the 2-year Treasury rose 53 basis points, while the yield on the 10-year Treasury bond rose a similar 50 basis points. Yields rose after a slew of strong economic data indicated to investors that the economy was not slowing as previously anticipated. Yields on the 2-year and 10-year Treasury have risen counter-intuitively since the Fed cut interest rates in September.

Economic Update

Economic data showed resilience in October, with inflation measures aligning closer to the Fed's 2% target. The Consumer Price Index rose by 2.4%, and the Personal Consumption Expenditures Index reached 2.1%, indicating a steady moderation in price pressures. Although third-quarter GDP growth slightly missed expectations at an annualized 2.8%, it remains above the long-term average, driven by robust consumer spending and business investments. Altogether, these indicators reflect the economy is expanding sustainably, with several sectors, from manufacturing to services, showing overall growth in a lower-inflation environment.

Historic Ocean Liner to Sink for good cause

After decades of being docked at various ports along the East Coast, a historic ocean liner could find a new home – under the sea. Currently moored in Philadelphia, the United States is set to embark on its final voyage to Florida, where it’ll be sunk off the coast and serve as an artificial reef.

The United States has a storied past. It was the largest passenger ship ever built in the U.S. and set the transatlantic speed record for a passenger vessel during its maiden voyage in 1952. Though it was built as a luxury ocean liner, the ship could easily be converted to carry troops into war should the need arise. During its 17 years as a transatlantic ocean liner, the vessel ferried immigrants, celebrities, and heads of state - including John F. Kennedy - between the U.S. and Europe. However, by 1969, the ship was decommissioned as airline travel across the Atlantic increased in popularity.

Due to rising docking fees, conservationists had been searching for a more cost-effective home for the ship where it could be preserved. Okaloosa County, Florida officials expressed interest in purchasing the vessel to help boost local tourism. The county has more than 500 artificial reefs off its shores, and the addition of the United States would be a boon for its diving and fishing industries. Once the sale is final, it will be 1.5 years before the ship reaches its final destination as it’ll first need to be cleaned, transported to the area, and then sunk into the ocean.

For more details on this fascinating story, 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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