Weekend Update, December 9th, 2024

Index, Sector & Asset Performance

US stocks were up last week to new all-time highs with the S&P500 finishing the week near 6090. As tends to happen near year end, technology stocks have led the recent rally as interest rates have declined against the widespread hysteria in the biased financial media of the idea that Trump 2.0 will lead to higher inflation. After a broadening out that saw the Russell 2000 outperform the Nasdaq 100 by 500 bps in November, large cap technology and the “Magnificent 7” has now risen 50% YTD after gaining 75% in 2023. On the back of lower interest rates and the dollar, international stocks showed a rare week of outperformance. However, the MSCI EAFE Index still lags the S&P 500 by 6% since the U.S. election only a month ago.

Global stock returns year to date:

Fixed income markets rallied last week on less concerns over the Trump 2.0 agenda and optimism of a December Federal Reserve rate cut. Short term rates fell. The 2-year Treasury fell to 4.1%, a 6-week low. Expectations for Fed moves in 2025 remain anchored to 2-3 rate cuts.

Economic Indicators and Earnings Commentary

The ISM surveys were split last week. On the manufacturing side, the index rose by the most since March. However, the Services index fell sharply as pre-election sentiment weighed on the consumer. The Michigan consumer confidence number rose modestly. Next week brings the final CPI report before the FOMC’s Dec 18 meeting.

The 3q24 earnings season is over. According to Goldman Sachs, revenue growth accelerated to the fastest pace since 1q22. Real revenues, excluding the energy sector, rose +4.6% year-over-year. Economic activity remains far from contraction. The US consumer remains strong. The commentary indicated that consumer spending remained resilient except at the lower income levels. Lower-income consumers have seen modestly weaker spending growth over the last year and have shifted spending toward Walmart and other discount retailers.

Per FactSet, 51% of the S&P beat consensus earnings expectations by more than a standard deviation of analyst estimates. This is above the long-term average of 49% but below the 57% average of the last six quarters. 3q24 earnings grew +8% year-over-year which was above consensus expectations for +3% growth but below the +11% pace of Q2.

Global Market Trends/Commodities/Currencies

Oil prices close around $67/bbl ending the week lower again. Saudi Arabia’s decision to delay output increases from January to April didn’t move markets. Middle East cutbacks seem priced in already.

Bitcoin crossed over $100k and then quickly pulled back -4%.

Oak Harvest Weekly Stock Talk

S&P 500=700 in 2025, Reality Check