Guidance Wealth will be closed at 4:00pm Tuesday, December 31st and Wednesday, January 1st for New Year’s Day. Thursday, January 2nd the office will re-open at 9:00am. The Markets Consumers were more optimistic. Investors were less so. As we neared the end of 2024, U.S. consumers were feeling optimistic. Every month the University of Michigan Survey of Consumers conducts about 600 interviews with American households, asking interviewees about their personal finances, business conditions, and buying conditions. In December 2024, the Index of Consumer Sentiment was up 3.1 percent month to month, and 6.2 percent year to year. Consumer sentiment rose “for the fifth consecutive month…reaching its highest value since April 2024. Buying conditions exhibited a particularly strong 32 [percent] improvement, primarily due to a surge in consumers expecting future price increases for large purchases…Broadly speaking, consumers believe that the economy has improved considerably as inflation has slowed, but they do not feel that they are thriving; sentiment is currently about midway between the all-time low reached in June 2022 and pre-pandemic readings,” reported survey Director Joanne Hsu. Individual investors, on the other hand, were feeling less bullish than they did earlier in the month. The AAII Investor Sentiment Survey found that investors’ outlook shifted in December. Investors became more uncertain, and a higher percentage reported feeling bearish. Investor sentiment is often considered to be a contrarian indicator. The AAII website explained, “Although investors would like to imagine that their decisions are rational, most have bought at near-highs due to fear of losing out on gains and sold at near-lows due to fear of further losses. This herd behavior is called market sentiment; when market sentiment is low, the majority believes the market will fall, while high market sentiment means that the majority feels the market will rise in value. However, more often than not, the market will move against the sentiment of the majority. Therefore, many professional money managers use market sentiment as a contrarian indicator, buying when sentiment is pessimistic and selling when sentiment is optimistic.”
Last week, major U.S. stock indices finished higher, and yields on longer maturities of U.S. Treasuries rose. The benchmark 10-year U.S. Treasury yielded 4.62 percent at the end of the day on Friday. The Guidance Wealth office will be closed Tuesday, December 24th* and Wednesday, December 25th and will re-open on Thursday, December 26th at 9:00 am.
*The physical office will be closed, but you may call the office on Tuesday, December 24th from 9:15 am until 1:00 pm. The Markets But that’s not what I wanted! Last week, markets were about as happy as a toddler opening a gift they didn’t like. The first upsetting event followed the Federal Reserve (Fed)’s final policy meeting for 2024. The Fed met expectations by lowering its policy rate one-quarter of a percentage point, as many economists had anticipated. The federal funds rate is now a full percentage point lower than it was at the start of September. In later remarks, Fed Chair Jerome Powell confirmed the United States economy remained strong, the jobs market remained solid, and progress had been made toward the Fed’s inflation goals. That was all good news. The upset came when Powell pointed out that inflation remained higher than the central bank’s target and the Fed will “be more cautious as we consider further adjustments to our policy rate.” Powell’s statement was reflected in the “dot plot,” a scatter chart showing projections for the federal funds rate over the next three years. The chart suggested there may be only two rate cuts in 2025, which is fewer than markets had hoped. “Stocks tumbled 3 [percent] and bonds plunged too, sending yields on benchmark 10-year Treasuries to their highest in seven months…Of course, Powell’s remarks…weren’t a total blindside. Economic data has been hinting at a resilient U.S. economy, while inflation has remained stubbornly above the Fed’s 2 [percent] target. In the $29 trillion U.S. bond market, traders had pushed yields up some 75 basis points on the 10-year Treasury since the central bank first started cutting rates in mid-September,” reported Liz Capo McCormick, Michael Mackenzie, Jess Menton, and Alexandra Semenova of Bloomberg. The markets’ malaise deepened as the specter of a holiday government shutdown appeared. “The S&P 500 dipped late Wednesday…after [Elon] Musk and [President-elect Donald] Trump derailed the original spending deal,” reported Anita Hamilton, Liz Moyer, Bill Alpert, and Callum Keown of Barron’s. A fast-tracked second deal also failed. The chance of a shutdown loomed as markets closed for the week, but policymakers passed a stopgap funding bill just after midnight, reported Christina Wilkie of CNBC. Markets were concerned because government shutdowns hurt the American economy. “A shutdown at the end of 2018 that ran through the new year was partial because five of the government’s 12 appropriation bills had been funded. Even still, the shutdown…reduced the U.S. gross domestic product by $11 billion, according to the Congressional Budget Office,” reported Dan Rosenzweig-Ziff of The Washington Post. Investors’ spirits lifted on Friday after the Fed’s favorite inflation gauge was released. The Personal Consumption Expenditures Index showed that headline inflation was 2.4 percent year over year, slightly higher than the previous month. However, core inflation, which excludes food and energy, cooled significantly month to month. Last week, major U.S. stock indices finished lower. The yield on the 10-year U.S. Treasury rose last week, steepening the yield curve, reported Liz Capo McCormick of Bloomberg. The Guidance Wealth office will be closed Tuesday, December 24th* and Wednesday, December 25th and will re-open on Thursday, December 26th at 9:00 AM.
*The physical office will be closed but you may call the office on Tuesday December 24th from 9:15 am until 1:00 pm. The Markets How high can U.S. stocks fly? The U.S. stock market has delivered exceptional performance over the past few years and remains on track to deliver solid returns in 2024. “It isn’t a secret that U.S. stocks have outperformed the rest of the world. Over the past decade, the S&P 500 returned 13 [percent] a year on average,* compared with less than 5 [percent] for the MSCI EAFE [Europe, Australia, and Far East] index of developed countries. Investors can thank the health of the U.S. economy and the remarkable growth of the tech sector. The downside: U.S. stocks now trade more than 21 times earnings, compared with less than 14 for international ones…” reported Ian Salisbury of Barron’s. In recent weeks, though, the stock market appears to have lost some steam. While Magnificent Seven technology stocks have pushed higher, many other stocks have moved lower. On Thursday, Geoffrey Morgan of Bloomberg reported, “The S&P 500 Index closed out its ninth consecutive day where the number of constituents falling outnumbers those rising. That’s [the] longest such streak since Bloomberg started collecting the data in 2004. The development signals that the foundation of the stock-market rally is weakening, with strength in technology high-flyers offsetting softness everywhere else.” As the end of the year approaches, major U.S. stock indices are near record highs. U.S. Equity Strategist Mike Wilson, who is optimistic about the outlook for the U.S. stock market, told the hosts of Bloomberg Open Interest that investors should be prepared for some uncertainty and volatility and, possibly, a stock market correction. A correction occurs when the stock market drops by more than 10 percent, and by less than 20 percent, from its recent peak. While corrections are uncomfortable for investors, they tend to wring out irrational exuberance and ring in more reasonable share price valuations, reported James Chen of Investopedia. Last week, the Nasdaq Composite Index, which is heavily weighted in technology stocks, passed 20,000 for the first time. The Nasdaq finished the week higher, while the Standard & Poor’s 500 Index and Dow Jones Industrial Average moved lower. Concerns that sticky inflation might lead the Federal Reserve to pause its rate-lowering cycle pushed the yield on the benchmark 10-year U.S. Treasury lower last week, reported Sinéad Carew and Harry Robertson of Reuters. * The 10-year return for the Standard & Poor’s 500 Index in this quote is different from the return in our table because the author used the Index’s return with dividends reinvested. The return in our table does not include reinvested dividends. The Markets
U.S. stocks thrive amid turmoil. The performance of the U.S. stock market is striking. Last week, the Standard & Poor’s (S&P) 500 closed at a record high for the 57th time this year, reported Rita Nazareth of Bloomberg. Here are some of the notable factors that sent stocks higher last week: Political upheaval overseas. A declaration and cancellation of martial law in South Korea and the toppling of the French government roiled financial markets overseas, making United States markets attractive. “The political chaos spanning Seoul to Paris this week is reinforcing why many investors have chosen to stick to American markets,” reported Simon Kennedy and Phil Serafino of Bloomberg. A powerful technology rally. Spending and excitement around the potential of artificial intelligence (AI) continue to delight investors. Both the communication services and information technology sectors are expected to report double-digit earnings growth during the last three months of 2024, reported John Butters of Factset. Rising company profits have been driven by higher spending. “While the ROI [return on investment] of any given AI project remains uncertain, one thing is becoming clear: CIOs [chief investment officers] will be spending a whole lot more on the technology in the years ahead. Research firm IDC projects worldwide spending on technology to support AI strategies will reach $337 billion in 2025—and more than double to $749 billion by 2028,” reported Paula Rooney of CIO. Continued U.S. economic strength. Employers added 227,000 new jobs in November. That was well above the 200,000 forecasted, reported Barron’s. Stocks rose on the news, and so did expectations that the Federal Reserve will lower interest rates again at its December meeting. Lower rates are typically good for companies because they often lower the cost of borrowing and lead to higher spending. By the end of the week, the S&P 500 and Nasdaq Composite Indexes were higher. The Dow Jones Industrial Average finished lower as it has less exposure to technology stocks, according to Barron’s, and more significant exposure to a large health insurance company that saw its stock price fall sharply after the assassination of its chief executive officer last week, reported Caroline Valetkevitch of Reuters. Treasury bonds gained last week, too, as yields moved lower on expectations of a Fed rate cut. When any asset class experiences significant gains during the year, it’s important to review your investment allocations and make adjustments to maintain the risk profile that makes you most comfortable. Rebalancing also helps investors follow an important investment strategy: buy low and sell high. The Markets
Not one, but two! United States stock markets are serving another cup of cheer this year. The Standard & Poor’s (S&P) 500 Index returned more than more than 24 percent in 2023. This year, it was up 26.5 percent through the end of November. It’s possible 2024 will end up in Wall Street’s bull market hall of fame, wrote Jan-Patrick Barnert of Bloomberg, because the year-to-date return of the S&P 500 ranks among its best performances of this century. “Not many expected another blistering rally fueled by a handful of tech titans and market sentiment so bullish that one risk event after another got cleared without a scratch… Market swings were benign, with only one big valley of tears: a summer pullback that culminated in a small selloff around early August. The drop lasted for just less than a month and failed to cross the threshold of 10 [percent], typically seen as a correction.” On a relative basis, U.S. stock markets have significantly outperformed stock markets elsewhere. Consider the performance of a few non-U.S. indexes through Thanksgiving. Index name Year-to-date return (thru Nov. 28, 2024) MSCI Europe 0.98 percent MSCI Europe, Australia and the Far East (EAFE) 2.95 percent MSCI Emerging Markets (EM) 5.46 percent MSCI Japan 6.14 percent MSCI China 12.91 percent MSCI India 13.54 percent Over the year, the number of U.S. stocks participating in the rally rose. “The rally is broadening out…more stocks are advancing than declining. Typically, that phenomenon bodes well for the entire stock market. It’s a sign of better market breadth, meaning that the major indexes aren’t being led by just a small handful of stocks,” reported Paul R. La Monica of Barron’s. However, La Monica also cautioned against becoming complacent, “…given how long it has been since Wall Street has faced any significant obstacle, it isn’t entirely clear what might happen if market or economic conditions suddenly head south.” Last week, stocks jolted up and down as investors responded to data about political appointments, tariffs, and inflation data. By the end of the week, major U.S. indices were higher. Treasury bonds gained, too, as yields moved lower after president-elect Donald Trump nominated hedge-fund billionaire Scott Bessent to be U.S. Treasury Secretary. Many believe Bessent could be a moderating influence when it comes to taxes, tariffs, and the deficit, reported Mitchell Hartman of Marketplace. |
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