Market moves across the month were to the south. Fixed income markets seemed to have a more drastic message on the monitor than that of equities.
Fixed Income: 2-Yr Treas Yield 4.16% | 10-Yr Treas. Yield 4.28%
Bond markets went for a reversal ride in October. After several months of falling rates, we began to see a pullback in the bond market as interest rates rose. The 2-year treasury rose 0.55%, while the 10-year treasury rose 0.54%. The good news is that while rising, the rates did not invert again. The long picture remains intact. We are still in an elevated rate environment with them more likely to drift south rather than north. This move may have been the result of predictions for a potential structure that would mean tariffs. This would reflect a higher inflation potential which would signal a slower path in future rate cuts. Additional good news is that while rates from 6 months on rose, shorter duration rates continued to fall. This bodes well for the normalization of the entire curve.
Equities: Dow Jones 1.34% | S&P 500 0.99% | NASDAQ 0.52%
While it was a down month for equites, the overall move south was not bad for the month. From the top of the market for the S&P 500 (10/18/2024) to the end of the month logged a 2.83%. This proved to be a mild lead up to the beginning of November. The nice part is that while a correction has not materialized, earnings season did, bringing the P/E ratio for the S&P 500 back down to 21.19.
Throughout the month utility stock did well until the last week of the month. A shifting towards Financial and consumer discretionary was underway. Neither of which are surprising given interest rates (favoring financials) and the fact that we are in the fourth quarter… I like to say, ‘Americans spend money they do not have on things they do not need’, AKA: holiday season!
Conclusion
Equities pulled back less than was indicative of the rate move on the bond market. The move there signaled more concern about higher rates for longer than equities chose to price in. The shift in rates seemed like a long-term change in projection, while short rates seemed anchored to FRB actions. The longer rage rates often can be equated to long range GDP expectations. If the view is that we would have stronger forward GDP in 5 years, then we see a stronger 5-year rate.
A Look Ahead…
Market responses in October could have been far more drastic than they were. We should feel fortunate that we got the October that we did. This still leaves a correction (a market fall of 10% to 19%) unattended to. The last one ended 10/27/2023. While stretched P/E’s from over the summer have become more reasonable, that’s been due to strong earnings. Those may continue in the short run, but moving into 2025 those might be harder to come by. It may very well cause a correction in the first half of the year.
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| AUTHOR: Jason J. Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, |
This was a quiet week for markets. Is this the calm before the storm, or just the new norm?
Monday
The week opened with more of a whimper than anything else. The trading clearly pointed to renewed concerns regarding COVID and potential closures. The S&P 500 was little changed, down 0.1%. More telling was that energy closed lower and the NASDAQ rose.
Tuesday
Market volume increased Tuesday, however, markets were still fairly subdued. The S&P 500 gained 0.1%. The trading on Tuesday was decidedly more upbeat as everything retraced itself from Monday. Energy surged higher, the NASDAQ fell, and broadly market indices were higher.
Wednesday
Markets edge higher on Wednesday with the S&P 500 gaining 0.2%. CPI data for July showed an inflation rate of 5.4% YoY. While higher than the 5.3% expected, it was only modestly higher. Core CPI, which strips out food and fuel, came it at 4.3%.
Thursday
Markets expanded 0.3% in the most active day last week. Initial jobless claims improved, down to 375K. All major indices with the exception of he Russell 2000 were up.
Friday
The S&P 500 had a quiet Friday, up 0.1% most of the day and closing up 0.2%. Consumer Sentiment is projected to fall for August to 70.2, the lowest projected level since April of 2020.
Conclusion
Good or bad, it was a very quiet week on the market. The S&P rose 31 points, not even a full percent, however, stability and calm are not uncommon for August. The fall return to trade (volumes) could likely carry more volatility for equity markets.
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