Returns in the equity markets continued to broaden as mid- and small caps picked up the pace, as did value while information technology continued to consolidate recent gains. Evidence of this can be seen from the stock performance of Nvidia (NVDA), an AI darling, which posted a 95% jump in y/y revenues after the bell on Wednesday and yet the stock price barely budged. Overall, stocks moved higher with most major averages sitting within a percent or two of all-time highs. In fact, the Dow Jones Industrial Average, somewhat of a laggard year-to-date, closed at a record high, once again a reflection of the rotation into the value trade. Finally, the Russell 2000 (the second and third thousand largest stocks domiciled in the United States) closed 1.50% from an all-time high, which, if surpassed, would be the first for that index since November 8, 2021.
· Friday evening President-Elect Trump nominated Scott Bessent as Treasury Secretary. In our opinion, Bessent’s nomination to this post, one that is vital to the U.S. economy and financial markets is a sound one as most view him as one that would favor a staged in approach to tariffs and a reasonable hawk on the debt/deficit.
· The “Gravy Effect”: In 2020, Goldman Sachs coined a term for the market optimism surrounding Thanksgiving: “The Gravy Effect.” It highlights how, regardless of economic conditions, the period around Thanksgiving tends to be a buoyant time for the stock market. (Source, Goldman Sachs)
· Tyson vs. Paul. Netflix’s most recent venture into live sports had a whopping 60M household tune into the Jake Paul vs. Mike Tyson fight. For reference, Super Bowl 58, the most recent Super Bowl, had 128M households watch. In similar news, Comcast is set to spin off its cable channels, including MSNBC and CNBC.
· American Companies are stocking up to get ahead of Trump’s China tariffs. Businesses plan to stockpile, raise prices and accelerate shift to manufacturing elsewhere. Outbound shipments from China rose nearly 13% in October from a year earlier, well above consensus expectations and up sharply from the 2.4% growth in September. (Source; U.S. Bureau of Labor Statistics, Wall Street Journal)
· I’ll keep the car I’ve got as according to Edmunds, Americans paid $47,612 for a new car in October. This is almost $10,000 more than they did in 2019. Coupled with the interest rate on new car loans hovering near 7%, Americans are currently paying an average of $742 per month on car payments. (Source; CNN, Edmunds)
· As noted above, perhaps the equity markets are due for a breather. However, there is an adage on Wall Street, one put forth by famed investor Sir John Templeton long ago. It reads – “a rising market is born on pessimism, grows on skepticism, matures on optimism and dies on euphoria.” Despite our short-term cautiousness we would put forth to our readers that we are most likely still in the latter portion of the second stage, one of skepticism. One caveat – perhaps as it pertains to all facets of American life, including the financial markets, we are permanently entrenched in that phase.
· Mortgage Rates according to the Federal Home Loan Mortgage Corporation (FreddieMac), “mortgage rates ticked back up this week. Heading into the holidays, purchase demand remains in the doldrums. While for-sale inventory is increasing modestly, the elevated interest rate environment has caused new construction to soften.” (Source, Federal Home Loan Mortgage Corporation)
We don’t anticipate mortgage rates moving down appreciably from here until at least the inauguration as the broad potential outcomes of President-elect Trump’s economic agenda will most likely keep lenders and the Federal Reserve cautious.
It’s The Economy…”
· Sales of Existing Homes rose 3.4% to a Seasonally Adjusted Annualized Rate (SAAR) of 3.96 million units during October from 3.83 million during September (2.9% y/y) and in so doing marked the first positive y/y gain since July 2021. According to the National Association of Realtors (NAR) “the median existing home price for all housing types in October was $407,200, up 4.0% from one year ago ($391,600).” (Source, National Association of Realtors)
· Initial Claims for Unemployment Benefits for the week ending November 16th fell 6,000 to 213,000 from 219,000 the prior week, which was revised higher by 2,000. The four-week rolling average fell 3,750 to 217,750 from 221,500, which was revised 500 higher. Continuing claims for the week ending November 9th rose 36,000 to 1,908,000 from 1,873,000 the prior week, which was revised lower by 1,000. The continuing claims four-week average rose 5,000 to 1,879,250 from 1,874,250. (Source, U.S. Department of Labor)
· Housing Starts fell 3.1% or by 42,000 to a seasonally adjusted annualized rate (SAAR) of 1,311,000 during October, as compared to 1,353,000 in September (-4.0% y/y). According to Haver Analytics, “starts were 28.3% below the most recent peak of 1.828 million in April 2022.” During October, Single-family housing starts fell 6.9% or 72,000 to 970,000 from 1.042 million (-0.5% y/y). Meanwhile Multifamily housing starts jumped 9.6% to 341,000 in October from 311,000 during September (-12.6% y/y). Building Permits, a key barometer of future starts, fell 0.6% or 9,000 to 1,416,000 in October from 1,425,000 (-7.7% y/y). (Source, U.S. Census Bureau)
Upcoming Economic Reports scheduled to be released this week include the following: on Tuesday, November Consumer Confidence and October New Home Sales; on Wednesday, October Orders for Durable Goods, October Personal Income & Spending, October Wholesale Inventories, the Initial Revision to Q3 Gross Domestic Product and the Weekly Report of Initial Claims for Unemployment.
The Current Quarterly Earnings Season has begun to wind down as just a few stragglers remain. However, several companies of note are scheduled to report, including the following – Agilent Technologies (A), Best Buy (BBY), Dell (DELL), HP (HPE), Macys (M) and Workday (WDAY).
General Disclosure:“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
