Blog Post Month in Review
November 5, 2024

Quick Takes

  • Mixed Markets. October was more eventful for stocks than September due to a flurry of earnings reports from major companies. The S&P 500 rose in the first half of the month amid strong bank earnings but erased all the gains on the final day of October on disappointing earnings forecasts.
  • Inflation and Interest Rates. The 10Y treasury yield rose significantly in October from under 3.8% at the beginning of the month to nearly 4.3% by the end of the month. Meanwhile, the Consumer Price Index rose more than expected YoY, increasing 2.4% versus the forecasted 2.3%.
  • Tech Selloff. Technology stocks including Microsoft, Meta, and Apple sold off amid concerns about high AI infrastructure and product development costs and disappointing forecasts for Q4. Apple reported weak China results and missed analysts’ expectations on services revenue while Meta indicated more capital expenditure on AI infrastructure ahead.
  • Geopolitics. Conflict continued to rage in the Middle East in October as Israel remains at war with Iran, Hamas, and Hezbollah. The conflict escalated during the month after Iran fired missiles into Israel on October 1 and Israel retaliated hitting Iranian military targets later in the month.

Asset Class Performance

Large Caps had a good October relative to Small Caps, continuing September’s pattern. International equities underperformed the U.S. market during the month amid conflict in the Middle East and geopolitical tensions. Asset classes across the board ended the month lower including both fixed-income and equities.

Asset-Class-Performance-October-2024-Web

Markets & Macroeconomics

The economy continued to show signs of strength in October as job growth came in significantly above expectations for September and general economic activity continued to expand. Nonfarm payrolls increased in September by 254k versus the expected increase of 150k. The unemployment rate also fell from 4.2% to 4.1% during the month, indicating that hiring remains strong despite unemployment rising year to-date. Overall economic activity also continued to grow during the month as indicated by the S&P Global Composite PMI which was 54.3 for the month of October. Anything above a 50 indicates expansion while a reading below 50 indicates contraction. US economic growth has been driven by services growth. Manufacturing, by contrast, continued to see contraction in activity as production was constrained by labor strikes and two hurricanes. Inflation meanwhile remained slightly stickier than expected with inflation readings coming in slightly higher than forecasts. Personal Consumption Expenditures excluding food and energy (Core PCE) was up 2.7% YoY in September versus the expected YoY increase of 2.6%. This also was shown in the CPI numbers as September’s YoY change in the CPI was 2.4% versus the expected 2.3% jump. Despite the slightly higher reported figures, inflation remains much lower than it was at the beginning of the year. The housing market showed mixed signals this past month as mortgage rates remain high despite a 50bps rate cut by the FOMC in September. The 30-year mortgage rate rose from 6.7% at the beginning of the month to nearly 7.3% by the end of the month. New home sales for September came in above expectations at 738k versus the forecast of 720k, but existing home sales came in at 3.84M versus the expected number of 3.88M for the same month. The next FOMC meeting is on November 7, for which interest rate futures markets have priced in a 25bps cut as the most likely scenario. Companies and investors will also be watching the outcome of the US presidential election on November 5 closely.

Bottom Line: With inflation coming in higher than expected and economic activity remaining strong, the Fed is unlikely to cut rates by 50bps in November. A 25bps cut amid high interest rates and mortgage rates, slower job growth, and a YTD increase in unemployment remains the most likely decision at the FOMC meeting on November 7. The FOMC will also likely take into account the recent weakness in manufacturing and look to lower rates to boost the sector.

Download the full review.

©2024 Prime Capital Investment Advisors, LLC. The views and information contained herein are (1) for informational purposes only, (2) are not to be taken as a recommendation to buy or sell any investment, and (3) should not be construed or acted upon as individualized investment advice. The information contained herein was obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Investing involves risk. Investors should be prepared to bear loss, including total loss of principal. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance is no guarantee of comparable future results.

Source: Sources for this market commentary derived from Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds June be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

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