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.
~ Your Future… Our Services… Together! ~
Your interest in our articles helps us reach more people. To show your appreciation for this post, please “like” the article on one of the links below:
FOR MORE INFORMATION:
If you would like to receive this weekly article and other timely information follow us, here.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.
Markets moved a lot to go absolutely nowhere last week. Should we expect markets to continue to run in place?
Monday
Happy President’s Day!
Tuesday
S&P 500 lost 1.01% on Tuesday as tensions over the long weekend escalated in Ukraine. This marks the first time the S&P 500 closed down 10% from its closing high back on January 3rd.
Wednesday
The Markets opened in the green on Wednesday, but quickly faded to red. The S&P 500 lost 1.84%, but in a common theme as of late. The NASDAQ fell 2.57% leading the way lower. The push came as tensions continued to escalate in the standoff over Ukraine. Sanctions levied on Tuesday were followed with additional sanction threats on Wednesday.
Thursday
Late Wednesday night it was announced that conflict between Russia and Ukraine was no longer a possibility, but a reality. Markets opened deep in the red Thursday morning. As the day wore on and more governments came out condemning the move and specifying their response, markets climbed. This provided a level of certainty where buyers felt more comfortable coming back to the market. The S&P 500 ended up climbing 1.51% on the day. The NASDAQ led the way higher. The move sent the message that rate hikes may not be as frequent given geo-political upheaval.
Friday
Markets continued their march higher on Friday as the S&P 500 gained 2.24% on the day. This time, the S&P 500 led the way as investors were more measured to the impact that Ukraine will have on the Federal Reserve’s interest rate decisions.
Conclusion
While the intra-week change in the S&P 500 was as much as 5.50%, the week over week change was nominal. The week over week change itself was nominal. The S&P 500 ended up rising a meager 0.79%. One thing is for sure: volatility has spiked over the past several weeks and will likely remain in place for the next 30 days.
~ Your Future… Our Services… Together! ~
Your interest in our articles helps us reach more people. To show your appreciation for this post, please “like” the article on one of the links below:
FOR MORE INFORMATION:
If you would like to receive this weekly article and other timely information follow us, here.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.