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Last week delivered an exciting rally across major stock indexes, driven by the election results and a much-anticipated Federal Reserve rate cut. This blog will summarize critical developments that led to impressive gains in the S&P 500, Nasdaq, and Dow and provide insight on what these shifts mean for long-term investors like us. Let’s dive in. Election Boost Fuels Stock Market Rally: S&P 500 Crosses 6,000 The week kicked off with a bang following the recent election results. Investors reacted with optimism, pushing the S&P 500, the largest benchmark of the U.S. economy, above the symbolic 6,000-point mark, though it settled slightly below this level at the week's close. The large-cap S&P 500 gained 4.66%, the tech-heavy Nasdaq 100 rose by 5.41%, and the Dow Jones Industrial Average increased by 4.61%—marking all-time highs for the week. For long-term investors, a rally of this nature is highly constructive. Fresh highs for these indexes suggest investor confidence is strong and that, for the time being, the focus remains on growth and stability within the U.S. economy. Such performance aligns with the historical trend of post-election market rallies, particularly when election results are viewed favorably by the market. Federal Reserve Rate Cut Provides Further Economic Support As expected, the Federal Reserve announced a 25-basis-point rate cut at its November meeting. This was widely anticipated by the market and marks a continued effort by the Fed to support economic growth by maintaining favorable lending conditions. With this recent rate adjustment, the Fed's target lending range is now 4.50% - 4.75%, following an earlier 50-basis-point cut in September. The Fed’s decision to lower rates was a strategic move to keep the economy buoyant, particularly as inflation concerns persist. Lower rates generally support borrowing and spending, which can boost business growth and, by extension, job opportunities. As a result, markets reacted calmly, with stocks holding steady as bond yields softened following an initial rise earlier in the week. For long-term investors, the Fed’s steady hand provides confidence that economic conditions remain conducive to growth, even as inflation challenges persist. Insights from Powell’s Press Conference: A Look at Fiscal Policy and Debt Federal Reserve Chair Jerome Powell’s press conference, which followed the rate decision, brought valuable insights into the Fed’s stance on fiscal policy and national debt. Powell underscored the current fiscal path as unsustainable, with national debt levels rising relative to the size of the economy. His call for attention to this issue reflects a broader economic challenge: managing debt in a way that doesn’t jeopardize future growth. Powell’s comments serve as a reminder that while we enjoy current market gains, structural issues like national debt remain significant. For investors, this highlights the importance of having a well-diversified portfolio that can withstand shifts due to fiscal policy changes or economic slowdowns. The Fed’s approach and the economic stimulus provided by low interest rates are currently beneficial, but awareness of these underlying challenges is essential for making informed investment decisions. Volatility Dips as Election Uncertainty Resolves The $VIX, known as the "Fear Index" and a popular measure of market volatility, saw a dramatic decline last week, closing below $15.00, which is near its lowest levels for the summer. A dip of this magnitude in the $VIX generally indicates that investor anxiety is easing. Following the election and Fed rate cut, markets appear more confident, with uncertainty significantly reduced. While volatility is currently low, it’s worth noting that markets can quickly shift in response to major economic data releases. In the short term, decreased volatility is a positive signal, giving investors a more stable landscape to navigate. For those of us focusing on the long term, it’s also a reminder to stay consistent with our strategies, even if volatility returns due to future uncertainties or inflation concerns. Bitcoin Breaks Out, Hits New All-Time Highs Bitcoin enthusiasts saw substantial gains as the cryptocurrency surged over 12% last week, reaching above $77,000 per Bitcoin on the Coinbase exchange. Bitcoin’s limited supply and deregulation hopes have been primary factors behind its bullish trend, and last week’s rally underscores the renewed interest among both institutional and retail investors. Bitcoin’s impressive breakout reflects the evolving financial landscape and the increasing interest in decentralized assets. For investors with a higher risk tolerance, Bitcoin can represent a way to diversify their portfolios with assets that move independently of traditional markets. However, for most long-term investors, it remains prudent to keep crypto exposure to a manageable portion of one’s portfolio, balancing potential growth with volatility risks. Consumer Sentiment Reflects Resilience and Optimism With all the focus on markets and policy last week, consumer sentiment quietly posted a positive reading, showing resilience among consumers. The University of Michigan’s November consumer sentiment index rose to 73.0, outperforming expectations of 71.0. Consumer confidence is a vital economic indicator as it signals the likelihood of robust consumer spending, a key driver of economic growth. Improved sentiment reflects that despite inflation and potential rate hikes, consumers remain relatively optimistic. Strong consumer confidence is often a good indicator for sectors like retail, travel, and housing. For investors, this data supports the case for a diversified portfolio that includes consumer-driven sectors, which can benefit when sentiment is strong. Inflation Watch: CPI Data to Set the Tone for Coming Weeks Looking ahead, this week brings the release of the Consumer Price Index (CPI) data, which will provide further insight into inflationary trends. After last week’s rate cut and the upward pressure on bond yields, the CPI will be closely watched by markets as they look for signs of whether inflation is stabilizing. Any significant movement in the CPI could impact both market sentiment and the Fed's future rate decisions. The inflation trend remains a focal point for both policymakers and investors. If inflation shows signs of cooling, it could ease pressure on the Fed to continue aggressive rate hikes, providing a more favorable backdrop for equities. However, if inflation persists, we may see more volatility as markets adjust to a potential continuation of tighter monetary policy. A Strong Start to November for Long-Term Investors Overall, the start of November is setting a positive tone for investors, with last week’s market performance serving as a reminder of the potential for growth, even amid challenging economic conditions. Historically, November tends to be a constructive month for markets, and this year appears to be following suit. With election uncertainty largely behind us, investor attention will likely shift back to inflation data and how the Fed navigates economic growth alongside price stability. The U.S. dollar and bond yields will also remain in focus, as shifts in these areas can impact international and domestic investments. By staying informed and maintaining a diversified portfolio, we can continue to make sound decisions that align with our long-term financial goals. Staying Informed: The Importance of a Long-Term Perspective As we move forward, I will be closely monitoring these developments and providing updates to keep you informed. Last week’s strong performance reminds us of the value of a steady, long-term investment approach. While market shifts may tempt short-term reactions, history has shown that disciplined investing based on sound financial principles is the best path to wealth building. Thank you for reading, and as always, I’m here to answer any questions you may have about how recent economic trends impact your financial plan. Let’s keep looking forward to continued success in achieving your financial goals. Feel free to schedule an Exploration Call if you believe we may be of assistance.

Hello, everyone, and welcome to our weekly edition of Market Minutes. Here, we digest the latest market happenings, keeping you informed with clarity and confidence. October brought us no shortage of news, and as we step into November, the landscape remains vibrant with evolving data, earnings, and market behavior. Let’s dive in. A Look Back at October October, traditionally known for volatility, didn’t disappoint this year. As the month closed, the S&P 500 declined by 0.99%, the Nasdaq 100 dropped 0.85%, and the Dow Jones Industrial Average slid 1.34%. However, while October proved to be a challenging month for equities, the first day of November showed a different tone, even amidst weak payroll data. Earnings Season Unfolds This earnings season has been anything but straightforward. As of November 1st, 70% of S&P 500 companies had reported results, and 75% of those reported actual earnings per share (EPS) above estimates. However, the average beat of 4.6% falls short of the five-year average of 8.5% and the 10-year average of 6.8%, per FactSet. Results among the high-profile "Magnificent 7" tech companies have been mixed. While shares of Meta and Microsoft saw declines due to cautious future guidance despite surpassing earnings estimates, Amazon brought a touch of optimism, rallying after its positive results. Inflation Data: A Mixed Bag October’s inflation data brought both relief and concern: Consumer Price Index (CPI): September data released in October showed a slight uptick in consumer inflation. The monthly increase was 0.2%, higher than the 0.1% estimate. Year-over-year, CPI stood at 2.5%, the lowest since February 2021, but just above the Dow Jones consensus of 2.4%. Core CPI: Excluding food and energy, Core CPI rose 0.3%, higher than the expected 0.2%, pushing the annual rate to 3.3%. Shelter and food prices continued to be the primary drivers of inflation, accounting for the bulk of the increase in consumer prices. Producer Price Index (PPI): The September PPI showed no change, defying the forecast 0.1% rise. The markets reacted positively on the day of this data release. Core Personal Consumption Expenditures (Core PCE): October concluded with mixed results. Annual core inflation remained at 2.7%, against forecasts of a slight dip to 2.6%. Monthly PCE aligned with estimates at a 0.2% increase, with the annual headline rate at 2.1%, the lowest since February 2021. Labor Market Dynamics Labor data has been pivotal, influencing market sentiment and the Federal Reserve’s policy stance. September’s robust figures (254,000 jobs added versus the 150,000 estimate) painted a picture of a still-heated economy with a slight dip in unemployment to 4.1%. However, the November 1st release flipped the script: October saw just 12,000 new jobs, and combined revisions for August and September cut an additional 112,000 jobs. While this sharp slowdown raises concerns about labor market health, it might be welcomed by rate-cut advocates as evidence of cooling economic conditions. Notably, the decline was partly attributed to the impacts of Hurricanes Helene and Milton. Despite this weak data, major stock indexes remained steady, with the Nasdaq, Dow, and S&P 500 all posting positive performances on the day. Looking Ahead: Bullish Seasonal Strength? Historically, November and December are known for strong equity performances. Per CFRA Research, the S&P 500 has seen gains in 66% of November and 77% of December since 1945. This seasonality could provide a backdrop of cautious optimism as we move deeper into the fourth quarter. An Important Reminder As we enter a week with both an election and a Federal Reserve meeting, it’s essential to approach investment decisions with a clear head. Markets may react swiftly, but timing them perfectly is near impossible. Take lessons from 2020 as an example of the unpredictable nature of markets during major events. Our stance remains firm: Stay focused on the long-term plan, avoid emotional decision-making, and remember that both market corrections and rallies are part of the investment journey. Stick to your strategy and remember the timeless advice—it’s not about timing the market but time in the market that counts. Thank you for reading this week’s Market Minutes. Stay tuned, stay informed, and as always, we’re here to guide you through every twist and turn in the market. Feel free to ask any questions or discuss how these developments may impact your investment strategy. You make book an Exploration Call here!

As the 2024 presidential election season approaches its conclusion, the stakes are high, not just in terms of political outcomes but also for financial markets. It’s natural for investors to wonder how the election results might impact their portfolios and whether they should make any changes. Let’s dig into what history and current research tell us about this unique election cycle and the broader financial implications for both the short and long term. Historical Context: What the Data Tells Us First, it’s crucial to remember that U.S. markets have historically risen during election years. Since 1950, U.S. stocks have averaged returns of 9.1% in these years, according to research by Fidelity’s Denise Chisholm, director of quantitative market strategy (source: Fidelity’s Denise Chisholm, November 2023). A blend of anticipation and uncertainty often marks the election year, but the long-term data reveals an upward trend across most election cycles. The S&P 500’s performance data from post-election periods is insightful as well. The index has historically averaged an 8.3% return in the first year following an election. Year two shows a more modest 3.4%, year three boasts 14.7% and year four matches the election-year average at 9.1%. It’s clear that while election years can be turbulent, the stock market has historically weathered them quite well. The adage holds that past performance does not guarantee future results, but it offers context and reassurance (source: Haver, FactSet, FMR, November 2023). Elections and Market Performance: A Nonpartisan Analysis One of the most persistent myths is that one party is inherently better for the stock market than the other. The reality? Markets are nonpartisan. The historical data shows no consistent advantage for either Democrats or Republicans. The S&P 500 has averaged positive returns under nearly every combination of political control (source: Strategas Research Partners, November 2023). Robust historical analysis supports the idea that markets rise over the long term, regardless of which party holds power. While the U.S. stock market has historically performed better under Democratic presidents by a wide margin, that data is skewed by the significant economic recoveries following major crashes, such as those in 1929 and 2008, which happened under Republican administrations (source: Rob Arnott, Bradford Cornell, and Vitali Kalesnik, 2017). Ultimately, investors need to remember that political headlines may create short-term volatility, but markets are driven by much more than presidential policies. Corporate earnings, economic growth, interest rates, and inflation have a far greater impact on market trajectories than which party holds office (source: U.S. Bank Asset Management Group). The Impact of Political Gridlock One of the most exciting insights from historical data is that markets often thrive under a divided government. This may seem counterintuitive, but a closer look reveals why this is true. Significant policy shifts are less likely when different parties control the presidency, Senate, and House, and the status quo is maintained. Markets favor stability, which political gridlock often provides (source: Darrow Wealth Management). Darrow Wealth Management and other experts have pointed out that divided government scenarios result in higher stock market returns. Returning to 1958, elections with split-party outcomes have averaged two-year S&P 500 gains of 20.7%, compared to 14.2% for one-party rule. This stability can reduce policy-driven uncertainty, making it easier for businesses to plan and for markets to stay on an even keel (source: U.S. Bank Asset Management Group). Market Movement in Election Seasons Investors often ask, "Has the market already priced in the election?" The short answer is yes, to some extent. Markets are forward-looking and adjust to perceived outcomes well before the results are officially in. For example, prediction markets such as Kalshi and Polymarket show a higher likelihood of a Donald Trump win in late October 2024 (source: Polymarket, October 2024). These indicators inform market expectations, but surprises can still move markets significantly. What if Kamala Harris wins? While the race remains too close to call, a Harris victory could lead to more market movement due to lower current expectations of her winning than Trump. The most significant policy impacts will come from how power is divided in Congress, not just who sits in the Oval Office (source: Rob Haworth, U.S. Bank Asset Management). Policies and Sector Impacts While making investment decisions based on anticipated policy impacts is tempting, this is often a risky strategy. Historically, there has been little consistency in how specific sectors perform during election years, regardless of who wins (source: Fidelity’s Anu Gaggar). For example, renewable energy stocks surprisingly performed well under Trump, while traditional energy companies have done well during Biden’s term. The unpredictability of sector performance makes placing bets on individual industries risky. Furthermore, academic research, including a 2024 regression-based study by the Bank of Italy, highlights that specific policy expectations (e.g., Trump’s tariff plans or Harris’s proposed tax changes) can be correlated with market responses but are challenging to predict with certainty (source: Bank of Italy, 2024). Economic Fundamentals Over Politics As investors, we need to stay focused on fundamentals. Corporate earnings, economic growth, and inflation trends matter far more for long-term market performance than political outcomes. Anu Gaggar of Fidelity points out that politically driven economic cycles are more relevant to emerging markets with weaker institutions, not developed markets like the U.S. (source: Fidelity’s Anu Gaggar). Moreover, trying to time market moves based on election outcomes or campaign promises is often a mistake. Proposals on the campaign trail frequently change once a candidate is in office. Instead of making adjustments based on speculation, it’s wiser to build a well-thought-out, diversified financial plan (source: Naveen Malwal, Strategic Advisers, LLC). Sticking to Your Long-Term Plan It’s easy to get caught up in the noise surrounding election cycles. The headlines may be alarming, with each candidate portraying economic doom if their opponent wins. However, as seasoned investors know, reacting impulsively to political rhetoric can backfire. Even in years following presidential elections, when markets show weaker performance, the long-term trend remains positive (source: Darrow Wealth Management, U.S. Bank Asset Management Group). As Jurrien Timmer, Fidelity’s director of global macro, aptly puts it, “Elections tend to have less impact on the markets than politicians may like to believe” (source: Jurrien Timmer, Fidelity). Final Thoughts The 2024 election will undoubtedly be historic, and its results could introduce short-term market movements. However, as investors, we should focus on long-term goals, diversified portfolios, and sound financial principles. Whether the next president is Kamala Harris or Donald Trump, whether Congress stays divided or shifts to single-party control, the most important takeaway is this: stay invested, stay diversified, and trust the process (source: Multiple). Remember, markets are resilient and have historically risen through all political climates. Your financial plan should be built to withstand not just elections but the ups and downs of all market cycles. So take a deep breath, stay informed, and rest assured that you can weather whatever comes next with a thoughtful strategy. If your financial plan or investment portfolio could use a second opinion, we'd be happy to help. Schedule an Intro Call here!