Weekly Market Update: November 4, 2024
The Federal Reserve will likely continue on its recently commenced less-restrictive monetary policy course. Investors should note that the central bank was scheduled to hold its next Federal Open Market Committee (FOMC) meeting on November 6th and 7th. As the month of November began, the consensus sentiment was that the Fed would cut the federal funds rate by a more-modest 25 basis points following a half-point reduction in September, to a range of 4.75% to 5.00%. Favorable September inflation and jobs data were the primary reasons for the slightly less-dovish stance on monetary policy. Please note that the latest Personal Consumption Expenditures (PCE) Price Index and employment reports were due after we went to press.
The state of the U.S. economy heading toward 2025 will probably depend on the health of the consumer sector. Here, shoppers are proving resilient and may get a boost from a further reduction in interest rates over the remainder of this year and into 2025. On point, the Conference Board’s Consumer Confidence Index rose sharply in October, to 108.7, the highest reading since January. This encouraging outlook comes despite a rise in consumer credit card debt and resultant uptick in delinquencies.
Third-quarter earnings season has been somewhat supportive for stocks. With slightly more than one-third of the S&P 500 companies releasing results as of press time, 75% of those entities reported positive earnings-per-share surprises. That said, revenue growth has been more modest than in recent quarters, and the overall third-quarter earnings growth prognostications for the Index have come down some following the initial series of quarterly reports.
Meanwhile, the overseas outlook is unsettling. Wars in Ukraine and the Middle East continue, with fighting escalating in the latter region. This included the latest retaliatory action by Israel against Iran for its ballistic missile attack launched in October. Wall Street is closely watching these developments, as increased military actions pose threats to global supply chains.
Conclusion: Volatility picked up during the final week of October, as the market faced some possible headwinds, including further geopolitical unrest, a less-dovish Federal Reserve, rising Treasury yields, and the uncertainty of the Presidential election. Given this backdrop, a diversified portfolio led by high-quality stocks seems appropriate.
Source: ValueLine.com
