Is it really November 1st already? Time sure does fly bye when you’re having fun as the saying goes. Financial markets have been good to us this year and we believe this trend should continue into the new year given the economic underpinnings currently in place. As we mentioned in our September note, seasonal weakness abates, and seasonal strength historically takes hold for the months of November and December.
Market returns year to date have been impressive (as I knock on wood) with the Dow 30, the S&P 500 and the NASDAQ Indices returning a positive 12.23%, 20.80% and 22.20% respectively.
Potentially adding to our year-to-date returns, our research revealed that the S&P 500 Index has averaged positive returns of 1-2% within the month of November and 1-1.5% within the month of December, 72.5% of the time since 1950 -a pretty strong track record. If this trend stays intact, 2023 and 2024 index returns (back to back of 20 plus %), will notch its place in history -previously occurring only three times since 1930.
This morning, we received the October non-farm payrolls report which showed the U.S. economy added only 12,000 new jobs last month -lower than the 113,000 expected by Economists. Granted, this number was greatly skewed by disruptions from hurricanes and strikes, we feel it was low enough to reinforce our view that the Federal Reserve’s interest rate cutting campaign will continue with another .25% (25 basis point) cut next Wednesday, November 7th. As we have mentioned in prior notes, declining interest rates are a tailwind for equities and theoretically should light or keep a fire lit under the behind (rear end) of the economy.
Speaking of next week, the Presidential election is on Tuesday, and we do expect this event to create near-term volatility in both the equities and bond markets but we suggest you tune out this noise. This is to be expected, and it would be natural to assume that the heightened emotions and uncertainty of the election could substantially impact market sentiment and performance going forward.
However, historical data does not back up this intuition. Since 1950, U.S. markets have generally risen in election years, with the average return being 9.1%. It’s important to remember that markets are nonpartisan and its natural for individuals to look for a connection between who wins the White House and which way stocks will go. But regardless of who wins, a century of market returns shows that stocks trend upward over the long term -and we are long-term investors.
Remember, we are investing in companies which focus on serving their customers and growing their businesses, regardless of who is in the White House.
We do know there will be potential policy changes within four key areas, those being Tax, Trade, Regulatory and healthcare. In particular, we are keeping a keen eye on potential changes to tax policy. Specifically, regarding the 2017 Tax Cuts and Jobs Act legislature that is set to expire on December 31st, 2025. Depending on who wins next week, this legislation could be allowed to expire, or it could be permanently extended. The outcome of this policy will have meaningful ramifications in regard to financial/estate planning for our clients (which will need to be addressed in 2025) as well as corporate taxes which will ultimately affect bottom line EPS guidance which will affect stock prices.
In effort to provide a resource for both candidate’s policy proposals, we have included a link to the American Century 2024 Presidential Candidate Policy Comparison page https://res.americancentury.com/docs/2024-presidential-election-policy-comparison-table.pdf . It succinctly compares in real time both candidates’ proposed policies and what legislative action is needed to get each policy approved. We hope you find this helpful in your decision-making process. Either way, we stand ready to make portfolio adjustments as needed as our economic environment unfolds.
As always, we wish you and your family a great Friday evening, and a wonderful weekend!
Please reach out to us with any questions or comments you may have regarding your specific situation.
Jaran C. Day, Chief Investment Officer
Griffin Dalrymple, CFP®, Chief Strategy Officer
Past performance is not indicative of future performance.
The views expressed represent the opinion of Opinicus and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Opinicus’s view as of the time of these statements. Market performance cited is not indicative of portfolio performance experienced by portfolios Opinicus manages. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.