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More Blog PostsNovember 2024 - Market Update
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Key Observations
- Donald Trump led the Republican Party to a trifecta of the presidency & both houses of Congress. Markets are pricing in future tax-cuts, strengthening the US dollar & increasing domestic manufacturing activity.
- US stocks posted their biggest monthly gains in November, powered by the post-election "Trump Trades", pushing major indexes to record highs.
- Small-cap & Mid-cap stocks rose ~11% and ~9% respectively, while the Large-cap S&P 500 index rose ~6%.
- Consumer Discretionary & Financials were the best performing sectors, rising 12.91% and 10.46% respectively.
- The US dollar rallied on expectations that Donald Trump’s fiscal plans would be inflationary & keep short-term rates elevated for longer.
Data Dashboard
Stock Market
The S&P 500 Equal Weight Index (our preferred benchmark) was up 6.42% in November. Healthcare stayed flat and was the worst performing sector for the second month in a row. The new administration’s less-friendly stance towards pharma companies weighed heavily on the sector.
Global equities gained about 3.8% for the month. Chinese stocks declined due to concerns over a future trade conflict between the US and China.
The market’s anticipation of de-regulation boosted US financials & energy sectors, while industrials are expected to benefit from tax cuts & trade policy.
Tesla stock had an exceptional month, soaring 38.14% following Trump's return to the White House, supported by Elon Musk. Reports surfaced that Trump plans to relax federal regulations on self-driving cars, simplifying the rollout of autonomous vehicles.
November Monthly Returns (by US Sector)
Bond Market
US Aggregate bond prices rose 1.06%. On November 7th, the Federal Open Market Committee lowered the Fed Funds rate by 25 basis points, bringing down the target range to 4.50% - 4.75%.
The recent employment and inflation data supported the Fed’s decision to move towards a neutral policy stance.
Aggregate high yield bonds were up 1.66% in November, with the spread between Treasury & high yield bonds shrinking from 2.82% in October to 2.66% in November.
After Trump’s reelection, inflation expectations have shot up significantly, especially in the near-term. The implied inflation rate in the Treasury-Inflation-Protected-Securities(TIPS) market shows a 5-year breakeven rate of 2.38%.
Economics
The highlight of the month was the Nov 5th US presidential election. Donald Trump became the first Republican candidate to win the popular vote alongside the electoral vote in 20 years.
GDP came in at 2.8% QoQ, and the Personal Consumption Expenditure (PCE) Index came in at 2.3%YoY.
Global political tensions have been on the rise and a tariff trade war seems to loom between the United States & China. Markets are expecting domestic growth and a rise in inflation. The future of Fed rate-cuts is also very uncertain, especially if inflation starts creeping back up.
The VIX (volatility) Index ended the month at 13.76, indicating calmness in equity markets. From a historical standpoint, this presents an opportunity to cheaply hedge downside risk using derivatives.
New home sales for October fell month over month and came in under market expectations. By the end of November, the 30-year fixed mortgage rate (National Average) stood at 7.12%, significantly higher than the 6.58% low observed in mid-September. The housing market continues to see low activity with fewer people willing to commit to expensive homes at higher mortgage rates or give up their current lower, locked-in rates.
November Economic Dashboard
Tactical Trades
Our quantitative tactical stock portfolio is overweight in IT & Financials, and underweight in Real Estate & Utilities.
Our tactical ETF portfolio swapped out our China positions for Regional Banking stocks.
Our low-volatility tactical portfolio is still low-duration, given the extremely uncertain interest rate environment we are in.