Latest / Markets with Megan: A Quick Financial Markets Update / Trump's Return, Fed's Rate Cut, and Inflation Concerns | Episode 192 | 12-03-24

Transcript

Trump's Return, Fed's Rate Cut, and Inflation Concerns | Episode 192 | 12-03-24 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: We have the month of November in the books and we are entering the last month of 2024.
• 0:06
  Megan Horneman: It is Tuesday, December 3rd, and this is your regular segment of Markets with Megan.
• 0:10
  Megan Horneman: We're coming to you today to just give you a recap of what we saw from an economic and an asset class perspective in the month of November.
• 0:18
  Megan Horneman: The biggest news was the presidential election.
• 0:20
  Megan Horneman: President Trump won the White House, republicans won the House and the Senate.
• 0:25
  Megan Horneman: But the biggest news out of that and I think why the markets really cheered after that was the fact that there was no major uncertainty there that we had come into the election with about a 50-50 chance between Vice President Harris and former President Trump, and what the investors were concerned about was that we wouldn't get the results on the first night.
• 0:49
  Megan Horneman: But we did get results.
• 0:50
  Megan Horneman: Shortly thereafter we got the results of the House and Senate, so that uncertainty was cleared out of the market.
• 0:56
  Megan Horneman: That's why we saw some of the equity markets rally.
• 0:59
  Megan Horneman: Now let's dig into what we saw just from an economic perspective in the month of November.
• 1:04
  Megan Horneman: First of all, inflation, which has been one of our biggest concerns.
• 1:08
  Megan Horneman: Inflation continues to be stubborn, we saw on a year-over-year basis, not only on the consumer front, but also on the Fed's preferred measure, pce core.
• 1:22
  Megan Horneman: Both increased over the year-over-year basis more than the prior month.
• 1:25
  Megan Horneman: So inflation is stalling here.
• 1:27
  Megan Horneman: The progress we've seen it's primarily still in that services housing sector that we're seeing in inflation.
• 1:33
  Megan Horneman: The Fed they continue to cut interest rates, though.
• 1:36
  Megan Horneman: They cut them by 25 basis points.
• 1:38
  Megan Horneman: This was very much expected.
• 1:40
  Megan Horneman: They did come in with their minutes from their meeting, though, and they made some comments about how the future of rate cuts if there are future rate cuts is that they will be gradual moves in the future.
• 1:53
  Megan Horneman: So this reduced a lot of the investors expecting aggressive rate hikes over the next year.
• 1:59
  Megan Horneman: From the consumer front, we saw confidence not only from the University of Michigan but also from the Confidence Board.
• 2:06
  Megan Horneman: Both of these rise, and that's after the election.
• 2:10
  Megan Horneman: Again, no election uncertainty.
• 2:12
  Megan Horneman: So we did see confidence improve.
• 2:15
  Megan Horneman: However, we started to see that weakening in consumer spending that we've been concerned about.
• 2:21
  Megan Horneman: When you look at the control number and when I say the control number, that is retail spending, excluding food, gas, autos and building materials, all these things that can be volatile items when you exclude all of them, retail sales actually declined for the month.
• 2:38
  Megan Horneman: So we're bit stretched here with record high credit card debt and delinquencies rising.
• 2:45
  Megan Horneman: Now let's dig into the asset classes, the MSCI All Country World, which is your global index on equities.
• 2:51
  Megan Horneman: It rose for the sixth out of the past seven months.
• 2:54
  Megan Horneman: It was primarily led by the US and when we dig apart the US, we started to see some of these returns broaden out.
• 3:02
  Megan Horneman: We saw small caps, mid caps.
• 3:05
  Megan Horneman: Both started to rise in conjunction with the large cap market.
• 3:09
  Megan Horneman: We actually saw the Russell 2000 post its best monthly return that we've seen this year.
• 3:15
  Megan Horneman: In the large cap space we started to see from a sector level that broadened out outside of just technology.
• 3:21
  Megan Horneman: We saw financials, consumer discretionary stocks.
• 3:24
  Megan Horneman: These stocks rallied in the month of November and when you look at fixed income, it was a really volatile month.
• 3:32
  Megan Horneman: For quite some time during the month, yields rose, which meant prices declined.
• 3:37
  Megan Horneman: However, when we ended the month, we did see yields come back down.
• 3:40
  Megan Horneman: They rose in about the middle of the month on the concern around inflation.
• 3:46
  Megan Horneman: They came back down when we started to get some mixed economic data and some uncertainty around the economic outlook.
• 3:52
  Megan Horneman: So, basically, bonds ended the month relatively flat.
• 3:57
  Megan Horneman: The gains, though, when you look, were really primarily led by credit.
• 4:01
  Megan Horneman: When you look at investment grade municipals and high yield and even emerging market bonds, they did better for the month.
• 4:09
  Megan Horneman: Commodities also, they finished the month slightly higher, though the biggest news out of commodities was that gold started to decline.
• 4:17
  Megan Horneman: We've had gold have a tremendous year this year, but because the dollar rose, there's optimism around growth.
• 4:24
  Megan Horneman: With a Trump presidency, less regulation, we started to see gold prices decline this month and that's been a rarity that we've seen this year.
• 4:33
  Megan Horneman: Now, that's just a recap of the past month.
• 4:36
  Megan Horneman: There's a lot of data this week.
• 4:37
  Megan Horneman: We've already got ISM manufacturing.
• 4:39
  Megan Horneman: We got the JOLTS report today, which came out better than expected.
• 4:44
  Megan Horneman: We've got a jobs report later this week.
• 4:46
  Megan Horneman: So we'll be back with several more economic pieces of data, and this is really one of the last weeks that the Fed will get an indication on what they can do in December.
• 4:56
  Megan Horneman: Remember they have a meeting and that they are still expected to cut interest rates by 25 basis points.
• 5:03
  Megan Horneman: However, it'll be very dependent upon what happens with the labor market this week and then any other inflation data that we get before their meeting.
• 5:11
  Megan Horneman: That's all we have today.
• 5:13
  Megan Horneman: If you like this podcast, please subscribe, send to friends, family, colleagues, hit that alarm bell and if you'd like a history of our podcast, please go to Markets with Megan dot fm.
• 5:23
  Megan Horneman: Thank you, you.