US equity markets bounced back in November, riding a post-election surge higher as the “America First” trade benefited domestic equities at the expense of their international counterparts. The S&P 500 index rallied +6% and is now up +28% with one month left to go in the year.
Smaller company stocks, which have greater leverage to the local economy, surged +11% in November, with the Russell 2000 index now up +21.5% year-to-date.
International stocks fell -1% on the prospect of higher tariffs hurting trade, as the MSCI ACWI ex-US index is now up just +8% on the year.
Within fixed income, interest rates ended the month lower as markets continue to digest the Fed’s rate cut plans. The Bloomberg Aggregate Bond index gained +1% in November for a +3% return year-to-date.
Commodity markets were mixed, while Bitcoin prices surged to new all-time highs in anticipation of a more crypto-friendly regime.
Our proprietary Three Dials readings remain unchanged through the end of November, as we outline below:
Despite several bouts of volatility during the year, the S&P has managed to avoid a 10% correction during 2024, which we expect to continue heading into the seasonally strong month of December.
Given that we see a correction on average every 16 months, we won’t be shocked to see one come 2025, but for now our Momentum Dial stays Positive.
While consumers appear optimistic about another Trump presidency’s impact on the economy, inflation worries have also reemerged, with two consecutive above-trend prints causing uncertainty around the extent to which the Fed can continue cutting rates.
While we await clarity on the near-term direction of growth and inflation, our Fundamental Dial remains Negative.
With the S&P on pace for its second consecutive year of over 25% gains (and third in four years), we remain in an environment of single-digit earnings growth, which has pushed forward price-to-earnings ratios to multi-year highs on par with the Dot Com bubble.
This leaves our Valuation Dial in a Negative position.
Our composite Three Dials reading remains in a Moderately Defensive position through the most recent month-end, with two dials Negative and one dial Positive.
Sources: Morningstar