Economic and Market Overview
November 2024
A Republican sweep of the U.S. election sparked strong performance in equities and credit. The Treasury selloff that began in mid-September persisted at first, but reversed course late in the month.
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Stocks rallied after the election as the S&P 500 eclipsed 6,000 for the first time ever en route to a 5.9% return and new all-time high at month end. Small caps fared even better as the Russell 2000 Index gained 10.6%. Credit spreads tightened on the risk-on tone, and without much of a headwind from the primary market; J.P. Morgan reported $97 billion in total investment grade issuance for the month, which was broadly in line with the $102 billion average of recent Novembers. While Treasuries initially sold off and the curve bear steepened, yields eventually stabilized and then rallied after President-elect Trump announced Scott Bessent as his pick for Treasury Secretary. WTI futures ended slightly lower over a month that saw the commodity trade in a fairly tight ~$5/bbl range. The U.S. Dollar Index jumped after the election and rose steadily for the better part of the month, peaking at up 3.4% MTD on 11/22, before retracing exactly half of the move over the final week to finish 1.7% higher.
Economic Data
Despite a meager 12,000 reported pace of nonfarm payrolls growth in October, the release was distorted by hurricanes and strikes as the unemployment rate remained unchanged at 4.1%. Economists expect a rebound in NFP to 200,000 with no change in the unemployment rate when November data are released on December 6. Retail sales grew at a 0.4% rate, a 0.1% surprise to the upside. Although the variations that remove auto and gas sales came up a touch short, all three indices were revised upward for the prior month. The University of Michigan and the Conference Board, meanwhile, both reported an uptick in consumer sentiment in November. In the manufacturing sector, hard data were generally as expected while sentiment surveys were mixed. Housing data were also mixed in October as existing and pending home sales rose and beat expectations, while new home sales and housing starts declined and missed. U.S. real GDP grew at a 2.8% annualized rate in Q3 according to the second release, matching both consensus and the advance release. Even though personal consumption was revised down 0.2% to a still solid 3.5%, the revision was offset by increases elsewhere, particularly in the pace of nonresidential investment.
Inflation
As expected, the Federal Reserve lowered the policy rate by 25 bps at their November 6-7 meeting. On the economic fundamentals, the Fed’s message stayed largely the same: they believe inflation remains on a bumpy path back towards 2% and expect that continued softening in the labor market will justify additional rate cuts in the months ahead. In response to several questions about how the election results figure into the Fed’s monetary policy plans, Chairman Powell stated very clearly that the FOMC will adopt their usual wait-and-see approach to fiscal policy changes. Market participants have not been so patient, expressing their view that Trump administration policies will lead to higher growth, higher inflation, and fewer rate cuts from the Fed. December 2025 SOFR futures closed the month at 3.82%, which is 17 bps higher than Halloween and 100 bps higher than mid-September when prediction markets began to price a Trump victory.
Federal Reserve
The FOMC did not meet in October. Minutes from the September FOMC meeting suggested that the 50 bp cut at that meeting was a “recalibration” and signaled that future cuts would likely come in the 25 bp variety. Despite strong economic data received during October, commentary from FOMC officials generally argued that rate cuts would continue for at least the next several meetings. Market participants began to express doubts as short rate markets priced a 10-25% chance of a hold at each of the next four FOMC meetings and the December 2025 SOFR yield rose 65 bps during the month.
Sources: Bloomberg Index Services Ltd., Bloomberg.
This overview is for informational purposes only. The information has been obtained from sources considered to be reliable, but the accuracy and completeness are not guaranteed. There is no assurance that any economic trends mentioned will continue or that any forecasts will occur. Economic data are as of the dates noted.
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