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The euphoria of the election is slowing down, and the market has begun to level. Though the indexes last week were positive, there were several pockets of the market that underwhelmed.
Major Index Performances (as of Thursday Close):
- S&P 500: The benchmark index sank about (-0.76%)
- Dow Jones Industrial Average: The Dow decreased (-0.56%)
- Nasdaq Composite: The index fell (-0.92%)
- Gold: The Precious metal lowered (-4.7%)
Economic data reported this week:
Federal Chairman Jerome Powell signalled this week that the Fed is in no rush to cut interest rates while the US economy remains on solid footing. “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said during prepared remarks at an event in Dallas. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” Powell added the US has enjoyed the best domestic growth of any major economy and emphasized the strength of the labor market. He said the October slowing of jobs growth was largely due to storm-related damage. Interestingly, Powell didn’t mention why he was rushed to lower rates in September and again in November. His actions don’t necessarily align with his assertions.
Nevertheless, Powell’s recent comments have investors looking for hints of the Fed’s intended easing path headed into the new year. In fact, it’s possible to see one more rate decrease during the current year. Once again, if the economy is as strong as Powell portends, rate cuts are not needed at this point. Of course, President Trump’s election win has sparked worries that inflation could rise again under his proposals for broad tariffs and mass deportations, things that could cause the Fed to pause rate hikes, according to economists.
Powell’s comments also follow the latest inflation reading which shows wholesale prices rose 0.2% in October, according to data from the Bureau of Labor Statistics. The data was in line with expectations but showed inflation remains somewhat sticky, with a year-over-year increase of 2.4%. The core producer price index, which excludes food and energy prices, rose 0.3% in the month and 3.1% year-over-year. What the headlines fail to talk about is the real cost of living. Yes, inflation has retracted, but that doesn’t mean prices decreased. Rather, it means that prices are not rising as fast. The fact is, cost of living is up some 30% in just a few years.
Stocks showing weakness:
There are several areas that have not participated in the “Trump Rally”. Healthcare giants Johnson and Johnson, Amgen and Abbvie, along with consumer stocks Kimberly Clark, Phillip Morris and Dicks Sporting goods have bucked the trend and are trading lower. Tech giants Broadcom and Qualcom also failed to benefit from the post-election rally.
Mid and Small cap indexes were big winners last week. Optimism for small business can only be seen as a positive. After all, small businesses are a vital part of the American economy and workforce. our outlook for investing remains positive with signs of eventual growth. Along the way, however, increased volatility should not come as a surprise. Great damage has been done over many years, including a growing national debt that is just shy of $36 Trillion. Over time, our strategieshave remained rules-based with great discipline. We don’t trade on instinct or gut feelings. The election trade is behind us and things will eventually settle down and once again look to fundamentals. We continue to monitor for opportunities, and adjust accordingly, while avoiding the herd mentality. Have a wonderful weekend.
Your Portfolio Management Team
