Weekly Market Update: December 2, 2024
The Federal Reserve appears to have accomplished what it set out to do entering 2024. Indeed, the central bank, which has a dual mandate to promote price stability and foster full employment, has seen the pace of price growth slow during the course of this year, without disrupting the labor market too much. On a 12-month basis, the Consumer Price Index (CPI) has fallen from 3.4% in December of 2023 to 2.6% this October. During that stretch, the nation’s unemployment rate has risen to just 4.1%, which is a tick above the level considered to be full employment. Investors should note that after we went to press, the latest Personal Consumption Expenditures (PCE) Price Index reading, the assessment of inflation most closely watched by the Federal Reserve, was set to be released.
The economy continues to expand at a healthy pace. This progress has come on the strength of the U.S. consumer sector, which has proved resilient amid the higher price environment of the last few years. Our sense is that shoppers will spend at a healthy clip this holiday season, despite the continued uptick in nationwide credit card balances. On point, The Conference Board’s Consumer Confidence Index climbed to 111.7 in November, which was the highest reading since July of 2023 and followed the strongest monthly gain in more than three years in October.
Meantime, third-quarter earnings season proved to be a successful stretch for Corporate America. With 95% of the S&P 500 companies having reported results as of press time, profit growth was averaging nearly 6%. It marks the fifth-straight quarter of year-over-year earnings growth and was needed to justify the elevated price-to-earnings multiple for the Index entering the reporting season. This included another exceptional performance from semiconductor behemoth NVIDIA and commentary that demand for its processing chips used to power artificial intelligence (AI) platforms remains robust, which assuaged some building concerns about slowing AI spending.
Conclusion: The final month of the year started with the major equity averages not too far removed from their all-time highs. With forecasts still calling for another interest-rate cut before year’s end, a late-year “Santa Claus” rally is plausible. Given this backdrop, we think a portfolio consisting mostly of high-quality stocks is prudent.
Source: ValueLine.com
