Hope you are all doing well. Each of the major U.S. stock indexes added more than 1% in a holiday-shortened trading week. The move extended the previous week’s positive momentum. The S&P 500 and the Dow pushed their record levels higher, while the NASDAQ was fractionally lower than its record set about three weeks earlier. As for the month, U.S. stock indexes surged in November. It was the sixth positive result out of the past seven months and recovering from a slightly negative October. The Dow added about 7.5%, the NASDAQ gained about 6.2%, and the S&P 500 rose 5.7%. The drummer of the band My Chemical Romance passed away this weekend, I have broken down this week’s update using their songs.
Thank You for the Venom
Markets had braced for a heavy dose of venom for the nominee for Secretary of the Treasury. Investors breathed a collective sigh of relief this week after the Treasury secretary was revealed as Scott Bessent, a well qualified and uncontroversial choice. Yields of U.S. government bonds fell sharply on Monday after President-Elect Trump announced his selection. The yield of the 10-year U.S. Treasury closed around 4.17% on Friday, down from 4.42% at the end of the previous week and a recent intraday high of 4.50% on November 15. Yields of 2- and 10-year notes also slid. Who is the incoming treasury secretary and why did yields fall? Bessent is a hedge fund executive. He calmed investors’ nerves about the future of the U.S. economy. He is expected to back the incoming president’s economic goals including gradual tariffs and pro-business policies. However, as an old Wall Street hand and a fiscal conservative, investors believe Bessent will prioritize stability in the U.S. economy and markets.
The World is Ugly
Tariffs are coming. That’s bad news for international investing. I continue to recommend being overweight in U.S. stocks over investment-grade bonds and international equity. A threat on Monday from President-Elect Donald Trump to impose tariffs on goods imported from China, Canada, and Mexico fueled warnings from those countries about potential retaliatory trade moves. The Canadian dollar and Mexican peso fell sharply against the U.S. dollar, and stocks of selected automakers also dropped. Expect this type of tit for tat rhetoric to become the new normal.
Vampire Money
Prices continue to show stability allowing money to last longer. Inflation’s recent progress has stalled a bit but it is still much lower than what it was. Wednesday’s reading of the Personal Consumption Expenditures Index (PCE) rose at an annual rate of 2.3% in October, up from 2.1% the previous month. Excluding energy and food prices, the core PCE Index rose 2.8% in October, up from 2.7% in September. Stalling is not a bad thing. The elevated inflation of 2022 has trended downward and for the most part has stayed low. This has allowed multiple major central banks to ease monetary policies. Lower rates are supportive for economic growth, labor markets and corporate profits.
If you’d like to speak about your investments or your plan, my calendar link is below and you can schedule a phone or zoom appointment.
