The Week in Review: 12/02/2024
"Always buy your straw hats in the Winter" - Benjamin Graham
Despite the holiday-shortened week, equity markets rallied for the second consecutive week.
All three broad indices posted positive returns, with both the S&P 500 and Dow Jones Industrial Average reaching new all-time highs on Friday.
Closing out the month, November turned out to be the best-performing month of the year for the S&P 500, which rose 5.7%. Intra-week trading was choppy amidst an inflation reading and President-elect Trump's cabinet picks, but ended the week strong.
The Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) price index ticked up slightly for the month of October, rising 0.2% for the month. Over the trailing twelve months, the index rose 2.3%. Core PCE rose 0.3% for the month and 2.8% over the past year.
Services inflation was the biggest contributor while goods inflation declined.
Despite the uptick, we believe that the Fed will cut the federal funds rate again in December.
Headline and core inflation have been relatively muted in 2024, trending between 3.1% and 2.7%. It will likely take a significant uptick to divert the Fed from its present course.
A quarter-point (0.25%) cut seems likely in December, but the pace of cuts in 2025 remains uncertain.
Currently, the CME FedWatch Tool predicts a 64.2% probability of a ¼ rate cut at the Dec. 18th FOMC Meeting.
Consumer spending was still solid in October, though it tailed off a bit from September. Current-dollar expenditure rose 0.4% on the month, while personal income jumped 0.6%, doubling estimates. Disposable income increased 0.7%, giving consumers a little extra breathing room as we enter the holiday season.
The post-Thanksgiving shopping extravaganza showed consumers spent a record amount of money this year. The aggregate online sales totaled $10.8 billion according to Adobe Analytics. The record amount grew by 10% over last year’s then-record-setting turnout.
Contrarily, in-store turnouts saw an 8.2% drop according to Sensormatic Solutions. Foot traffic increased post-pandemic as consumers sought to get away from their computers. But now, it appears consumers are shifting back to old habits.
Another contributor could be big-box retailers hosting online Black Friday deals all week, making it easier and more convenient to make purchases on your own schedule.
Cyber Monday is likely to also see its own record turnout for the famous, traditionally online-only, shopping event.
As we begin the last month of 2024, we will receive ISM Manufacturing and Non-Manufacturing data as well as nonfarm payrolls for the month of November. October’s payrolls report was skewed heavily due to multiple hurricanes and a large strike. This month’s report should be more informative.
On the earnings front, only a handful of names are left to report. This week we will hear from Salesforce, Dollar Tree, Campbells, lululemon, and Kroger, among others.
We have had a lot of positive momentum so far this year. We expect that momentum to continue into the end of the year.
Have a great week!!
Michael D. Hilger, CEP®
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