December 8, 2024
Volume 11, Issue 49
Weekly Recap
The major domestic equity indexes closed mixed last week. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all continued to hit record highs, while the Russell 2000 declined after back-to-back weeks of outperformance versus its larger-cap counterparts. As measured by the Russell 1000, growth shares outperformed value stocks by 553 basis points (5.53 percentage points), the largest margin since the week ended March 17, 2023. Sector performance was also widely dispersed as consumer discretionary, communication services, and information technology shares all gained over 3 percent for the week, while energy, utilities, and materials stocks – typically the more value-oriented segments of the market – all fell over 3 percent. Geopolitical headlines through the first half of the week were largely dominated by French and South Korean politics, though these seemed to have limited impact on U.S. markets.
The week brought several closely watched economic reports, particularly related to labor market data, with much of the focus on Friday’s nonfarm payroll report. The Labor Department reported that the U.S. added a seasonally adjusted 227,000 jobs in November, which was slightly higher than consensus estimates. The November number represented a sharp rebound from October’s disappointing data amid the fallout from hurricanes in the southeast U.S. and a major strike at Boeing. The report also noted that unemployment in November increased a tick to 4.2 percent. Major stock indexes opened higher on Friday as investors appeared to celebrate the final major labor market update ahead of the Fed’s December meeting.
Earlier in the week, the Labor Department also reported the number of job openings in October increased to 7.74 million, up from September’s revised 7.37 million reading. The report also noted that layoffs during the month were little changed, but the number of Americans quitting jobs voluntarily – seen by many as a better measure of labor market conditions – increased to 3.3 million.
Elsewhere, payrolls firm ADP reported that private employers added 146,000 jobs in November, and annual pay increased 4.8 percent year-over-year. Commenting on the report, ADP chief economist Nela Richardson said, “While overall growth for the month was healthy, industry performance was mixed. Manufacturing was the weakest we’ve seen since spring. Financial services and leisure and hospitality were also soft.”
Other headlines last week centered around comments from Federal Reserve officials as traders continued to look for clues regarding the pace of interest rate cuts. Speaking Monday, Federal Reserve Governor Christopher Waller noted that despite some recent data indicating that progress on inflation may be stalling, he is leaning toward supporting a cut to the policy rate at the Fed’s December meeting, absent any surprising incoming economic data. Meanwhile, on Wednesday, Fed Chair Jerome Powell took a more neutral tone, stating, “The U.S. economy is in very good shape, and there’s no reason for that not to continue…. So, the good news is that we can afford to be a little more cautious as we try to find neutral.” Last week’s economic data releases, along with Governor Waller’s comments, helped boost expectations priced into futures markets for a 25-basis-point (0.25 percentage point) rate cut in December. U.S. Treasuries posted positive, if modest, returns across the curve last week. Yields on T-bills moved significantly lower, however, on expectations of Fed easing at the December FOMC meeting.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
Total nonfarm payroll employment rose by 227,000 in November, and the unemployment rate changed little at 4.2 percent, the U.S. Bureau of Labor Statistics reported Friday. Employment trended up in health care, leisure and hospitality, government, and social assistance. Retail trade lost jobs. The headline number was above expectations, and September and October payrolls were revised up by 56,000 combined. The participation rate and the employment population ratio declined. This report was boosted by the end of strikes (especially Boeing) and workers returning following the hurricanes. It probably makes sense to average the last two months, or about 132 thousand per month – down from the 153 thousand hiring pace over the previous 6 months.
In the week ending November 30, the advance figure for seasonally adjusted initial jobless claims was 224,000, an increase of 9,000 from the previous week’s revised level. The previous week’s level was revised up by 2,000 from 213,000 to 215,000. The 4-week moving average was 218,250, an increase of 750 from the previous week’s revised average. The previous week’s average was revised up by 500 from 217,000 to 217,500.
Consumer confidence surged this month on a better assessment of the U.S. economy, though opinions continued to diverge between Republicans and Democrats, with inflation expectations also ticking higher. The ISM® Services index was at 52.1 percent, down from 56.0 percent last month. The employment index decreased to 51.5 percent, from 53.0 percent. Note: Above 50 indicates expansion, below 50 in contraction. The ISM manufacturing index indicated expansion. The PMI® was at 48.4 percent in November, up from 46.5 percent in October.
The employment index was at 48.1 percent, up from 44.4 percent the previous month, and the new orders index was at 50.4 percent, up from 47.1 percent. President-elect Donald Trump plans to nominate Paul Atkins as chairman of the Securities and Exchange Commission, he announced Wednesday afternoon. Atkins, CEO of Patomak Global Partners LLC in Washington, is a former SEC commissioner.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
- The Endowment Syndrome: Why Elite Funds Are Falling Behind (Richard M. Ennis)
- U.S. Markets Are Swallowing the Rest of the World (Ben Carlson)
- Remembering Art Cashin (Barry Ritholtz)
- Top 11 Reasons that People Reach Out to Us for Financial Planning Help (Meg Bartelt)
This is the best thing I’ve read recently. The smartest. The wisest. The funniest. The most fun. The most sensible. DB Cooper. Bagels are hot. The most important cookbooks; the most important recipes. Not so much LUV. Legos. Mascots. Word of the Year.
From 1965 through 2023, $100 invested in Warren Buffett’s Berkshire Hathaway grew to $4,255,516. The same $100 invested in the S&P 500 is “only” worth $30,811 (that’s still better than 10 percent annually!). That means Berkshire could lose 99.3 percent and only then just match the index over 59 years.
“The typical experience of the speculator is one of temporary profit and ultimate loss.”
~ Benjamin Graham
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.
