Guidance Wealth will close at 4:00pm on Wednesday, November 27th and all day on Thanksgiving Day, November 28th.  Friday, November 29th, our office will be open 9:00am - 1:00pm.
  
The Markets
 
The post-election rally resumed.
 
Investors shook off concerns about interest rates and inflation, and U.S. stocks climbed higher last week. The Standard & Poor’s (S&P) 500 Index gained every day last week, and the rally wasn’t limited to a few popular stocks: 425 of the companies in the Index finished the week higher, according to Jacob Sonenshine of Barron’s.
 
“Beneficiaries of the incoming administration’s looser regulation and business-friendly stance put forth strong showings this week. Stocks gained while [cryptocurrency] crushed doubters and the dollar extended gains into an eighth week, the currency’s longest run of the year. Blue chips and small caps led Friday’s equities advance as this year’s big tech winners struggled to gain ground,” reported Cristin Flanagan of Bloomberg.
 
It has been a great year to own U.S. stocks. The S&P 500 is up more than 25 percent so far this year, performing significantly better than major indexes in Europe, Asia, and emerging markets, reported Lewis Krauskopf of Reuters. The catch is that markets are trading at heady valuations.
 
“…The broadening market can’t hide just how expensive stocks have become. The S&P 500 trades at 22.1 times 12-month forward earnings…the highest since 2020, when it hit 22.9 times. To see multiples meaningfully higher than that, one has to go back to the dot-com era, when the index traded at more than 25 times earnings,” reported Sonenshine of Barron’s.
 
Not everyone had an appetite for risk last week. The price of gold, which many investors consider to be a safe haven when markets are volatile, rose amid escalating tensions in the Russia-Ukraine war, reported Yvonne Yue Li of Bloomberg.
 
Major U.S. stock indices finished the week higher. Treasury yields were mixed last week with the yield on the benchmark 10-year U.S. Treasury moving lower over the week lower and the yield on the two-year U.S. Treasury moving higher. 

Guidance Wealth will close at 4:00pm on Wednesday, November 27th and all day on Thanksgiving Day, November 28th.  Friday, November 29th, our office will be open 9:00am - 1:00pm.
 
The Markets
 
The United States stock market changed course.
 
Last week, the strength of the United States economy slowed investors’ roll. Federal Reserve (Fed) Chair Jerome Powell told business leaders in Dallas, Texas, that the performance of the United States economy has been “remarkably good,” better than any major economy in the world, which gives the Fed “the ability to approach our decisions carefully.”
 
Powell’s comments caused investors to reassess the likely pace of rate cuts. As they did, the probability of a December rate cut fell sharply, according to the CME FedWatch Tool.
 
The likelihood that the Fed may lower rates more slowly than expected roiled markets. Lu Wang, Isabelle Lee, and Emily Graffeo of Bloomberg reported, “With the world’s most important central banker in no hurry to ease monetary policy thanks to a still-robust labor market and strong economic data, bond yields once again rose and dragged stocks lower in their wake. Down 2 [percent] over five sessions, the S&P 500 erased half of its trough-to-peak gains since the election. Combined with losses in corporate credit and commodities, the week rounded out a pan-asset retreat that by one measure was the worst in 13 months.”
 
Investors’ changing outlook was shaped by other factors, too. These included:
 

• Elevated stock valuations. Bella Albrecht of Morningstar reported, “The U.S. stock market is trading at an 11 [percent] premium to its fair value estimate.” The data reflected share prices on November 13, which was midway through last week.

 

• The risk of inflation rising again. Many economists believe the incoming administration’s spending and tax policies have the potential to reignite inflation, which could lead the Fed to reassess monetary policy.

 

• A disrupting cabinet nomination. Robert F. Kennedy Jr. to lead the Department of Health and Human Services rattled healthcare and consumer staples sectors of the market. “Shares of biotechnology and pharmaceutical companies fell, with the S&P 500 Pharmaceuticals index down about 2 [percent]. Shares of packaged food and beverage giants…also declined,” reported Samuel Indyk and Ludwig Burger of Reuters.

 
By the end of the week, major U.S. stock indices were down. U.S. bond markets continued to be wary of tariffs and inflation, lifting the yield on the benchmark 10-year U.S. Treasury to 4.5 percent. By week’s end, though, the 10-year Treasury yield had settled at 4.3 percent, reported Liz Capo McCormick of Bloomberg.

​The Markets
 
Stock markets celebrated the results of the presidential election. Bond markets were less enthusiastic.
 
Last week, United States stock markets rallied, and the U.S. dollar gained against other currencies, following the presidential election. The CBOE Volatility Index, Wall Street’s Fear gauge, also moved lower after concerns about a long wait for election results were quelled by a swift result, reported Alexandra Semenova of Bloomberg.
 
“…the [stock] markets roared in approval of this Trumpvember surprise…Yes, expect tax cuts, less regulation, fewer guardrails, and a government no longer picking winners and losers (except for tariffs), all reasons why investors perceive the incipient environment to be advantageous. And yet, with all the dancing, dancing, dancing in the streets, note that this new freedom could be accompanied by greater risk in the capital markets,” reported Andy Serwer of Barron’s.
 
The bond market’s response to the election was measured. The Federal Reserve (Fed) began lowering the federal funds rate in September. Typically, Fed rate cuts lead to lower borrowing costs for consumers and businesses, which supports economic growth. However, the yield on the 10-year U.S. Treasury, which is a benchmark for mortgage rates, corporate bonds, and other loan rates, has trended higher since September as strong economic data caused the market to rethink its expectations for future rate cuts.
 
Now, the bond market is evaluating future rate cuts in the context of the new administration’s policies. “…the outlook for further rate cuts has been clouded by expectations that key elements of Trump’s economic platform such as tax cuts and tariffs will lead to faster growth and higher consumer prices. That could make the Fed wary of risking an inflationary rebound by cutting rates too deeply next year,” reported Davide Barbuscia and Lewis Krauskopf of Reuters.
 
Markets are likely to remain volatile over the coming weeks as investors speculate about the impact of new policies on financial markets. Last week, major U.S. stock indices surged higher. Yields on U.S. Treasuries were mixed with yields moving lower on the shortest and longest maturities and rising for other maturities.

​The Markets
 
Are we witnessing an historic event?
 
For an airplane or a spacecraft, a soft landing occurs when the vehicle “touches the ground in a controlled and gradual way that does not damage it,” according to The Britannica Dictionary.
 
For the American economy, a soft landing happens when the Federal Reserve raises interest rates to cool the economy and push inflation lower—and achieves its goal without causing a recession and significantly higher unemployment. It’s not an easy task.
 
“Historically, soft landings have been tough to pull off…Keeping unemployment and inflation low while at the same time having robust growth is difficult. Threading that needle has proven to be quite elusive,” reported a source cited by Aly J. Yale of The Wall Street Journal.
 
Solid economic growth, low unemployment, rising wages, and falling inflation have one Federal Reserve official and several economists declaring that the American economy has achieved this rare event—a soft-landing, reported Bryan Mena of CNN.
 
So, exactly how well is the U.S. doing?
 
“The extent to which America has outperformed other countries since the start of the COVID-19 pandemic is breathtaking. Its real GDP has expanded by more than 10 [percent], nearly three times as much as the euro area. Among the G20 group, which includes both rich countries and emerging markets, America is the only one where output is above pre-pandemic expectations, according to the International Monetary Fund,” reported Simon Rabinovitch of The Economist.
 
Last week, “with an election and Federal Reserve meeting still to come, stocks faltered under the weight of the uncertainty,” reported Teresa Rivas of Barron’s. Major U.S. stock indices finished the week lower. Uncertainty about the direction of future government spending and its possible effect on Federal Reserve policy caused some turmoil in bond markets, too, reported Paul R. LaMonica of Barron’s. Yields on longer maturities of U.S. Treasuries moved higher over the week, while yields on shorter maturities moved lower.