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Monthly Economic Update: December

Written by support@seostats.com on . Posted in Monthly Newsletter, Newsroom.

In this month’s recap: Holidays & S&P 500 positive days

Presented by The PensionmarkMeridien Team, December 2024

Pending elections, “higher” interest rates, and labor market questions, there was a bit of uncertainty heading into November. But that uncertainty was short-lived. The presidential election was settled, and the November Fed meeting was in the books by early November. And November was a fantastic month for long-term investors!

With the presidential election out of the way and market sentiment rocketing, now is the perfect time to keep you informed about the latest developments as we head into the final month of 2024.

MAJOR STOCK INDEXES

November was good for long-term investors in U.S. stocks, with a continuing bid in U.S. equities leading up to and continuing after the presidential election. That makes it six out of the last seven positive months for the S&P 500 and eleven out of the previous thirteen — I think we will take that!

Overall, for the month of November, the S&P 500 added 5.73%1, the NASDAQ 100 tacked on 5.23%2, and the Dow Jones Industrial Average led the way — higher by 7.54%3.

FEDERAL RESERVE (FED) RATE DECISION

November kicked off with the Fed policy meeting on November 7th, as the Fed cut the overnight lending rate by 25 basis points in line with market expectations, with the next day’s presidential election on everyone’s mind. 

The recent decision follows the central bank’s significant 50 basis point cut in September and brings the current target lending rate range to 4.50% – 4.75%. The vote for the rate cut was unanimous, with this action aiming to support the labor market.  Additional data is needed for the Fed to assess the current state of inflation to determine policy action going forward.

As of market close on November 29th, markets favored another 25-basis-point cut (66% probability) at the December 18th meeting and a 34% chance of no change in rates, according to the CME FedWatch Tool.

Treasury Yields Fall

The widely monitored 10-year Treasury Note Yield declined moderately in November after rising in the previous month. It closed the month at a yield near 4.177%4 versus October’s closing level near 4.285%, a decline of just over 10 basis points month-over-month.The slight dip in rates is good news for sidelined prospective mortgage borrowers — and great news for long-term investors in U.S. equities.

COOLER JOBS MARKET

November kicked off with the monthly labor market data on the first of the month. The October non-farm payroll data, released in November, showed only 12,000 jobs5 were created, and the job totals for August and September were revised downward by a combined 112,000. This was not encouraging for the labor market, but it may be viewed as good news for those anticipating interest rate cuts.

Although the reported job creation figure was significantly lower than expectations, it seems that the actual expectations were much more subdued than the numbers would imply. The low number of jobs created for the month, the weakest since 2020, was heavily anticipated due to the impact of Hurricanes Helene and Milton, which had a considerable effect on the labor market.

Despite the disappointing data, major U.S. equity indexes performed well on the day of the report’s release, with the NASDAQ, Dow, and S&P 500 all showing gains on the daily trading session. November jobs data will be released on December 8th.

INFLATION RATHER MIXED IN NOVEMBER

According to metrics released at the end of November, inflation remained mostly unchanged in October.

CONSUMER PRICE INDEX (CPI):

Data showed a monthly increase of 0.2%6 for October, which matched consensus expectations. This resulted in a year-over-year inflation rate of 2.6%, slightly higher than the previous month’s reading of 2.4%. While the numbers align with expectations, they indicate a persistent inflationary environment.

Core CPI, which excludes food and energy prices, also rose as expected, increasing by 0.3% for the month and maintaining an annual rate of 3.3%.A significant factor contributing to the monthly rise in inflation was shelter costs (again!), which accounted for more than half of the increase. In October, shelter prices rose by 0.4% from the previous month and experienced an annual increase of 4.9%. Despite an overall stabilizing inflation environment, shelter prices remain high.

Overall, the CPI data can be interpreted as aligning with expectations; however, it also demonstrates some stubbornness, as it showed a rise from 2.4% in September to 2.6% in October. Major U.S. stock indexes experienced slight gains in the morning following the data release amid reinforced expectations for a 25-basis-point decrease at the December meeting. On the day of the data release, the likelihood of such a rate cut rose to approximately 82%.

PRODUCER PRICE INDEX (PPI):

The day after the Consumer Price Index (PPI) was released, wholesale prices showed a rise of 0.2%7 in October, matching Dow Jones estimates. Similar to the Consumer Price Index, this wholesale inflation data came in as expected; however, it still marked an increase from the previous month’s reading.

NOVEMBER INFLATION VERDICT:

Inflation is in line with expectations, but concerns about rising prices persist for many. Shelter costs continue to be stubborn. The general consensus is that the most recent inflation readings are somewhat supportive of a rate cut in December. 

CONSUMER HEALTH

Consumer confidence surged in November, fueled by a swift and decisive election outcome and indicating expectations of easier times ahead for consumers. The index rose to 111.7, its highest level since July 2023 and a 16-month high8.

Retail sales9 beat estimates in October (November data release), while September retail sales data was revised sharply higher. The consumer has remained remarkably resilient throughout the last several years, and it appears that sentiment is growing. 

Early Black Friday data shows a 3.4% annual rise10 in brick-and-mortar and online spending. This is a trend we have gotten used to in recent years, and we will see what Cyber Monday data looks like once it becomes available. 

We, the consumer, drive the economy at the end of the day! It is easy to lose sight of this fact with so many headlines and market noise. The consumer has been unbelievably resilient for a prolonged period.

RELAXED MARKETS

Short-term market volatility subsided impressively in November, with the CBOE S&P 500 Volatility Index falling to levels not seen since July of this year.

When S&P 500 volatility decreases, it indicates a reduction of investor fear in the marketplace, leading to a decline in the price of S&P 500 put options. Many portfolio managers use these put options to hedge against market risk. And throughout November, the demand for them was weak, suggesting increased market confidence.

Some investors also monitor the CNN Fear and Greed Index to assess overall investor sentiment. While short-term market sentiment isn’t a primary concern for most long-term investors, it can be beneficial for those who utilize dollar-cost averaging strategies.

LOOKING AHEAD

As we approach the end of the fiscal year, remember to consult with your tax advisor should you need to make any year-end moves in your portfolio to ensure optimal tax treatment. Long-term investing continues to be the ticket.

As always, if we can be of service in any way, please email or call us.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Do you want to receive articles like this or Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:
1. Trading View, November 29, 2024
2.   Trading View, November 29, 2024
3.   Trading View, November 29, 2024
4.   Trading View, November 29, 2024
5.   CNBC, November 1, 2024
6.   CNBC, November 13, 2024
7.   CNBC, November 14, 2024
8.   Reuters, November 26, 2024
9.   Yahoo Finance, November 15, 2024
10. Reuters, November 30, 2024

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Economic Update for the Week of November 18

Written by support@seostats.com on . Posted in Newsroom.

In this week’s recap: Inflation interpretation, rate cut?

Presented by The PensionmarkMeridien Team, November 19, 2024

Major U.S. stock indexes digested monthly inflation data last week, and market participants reacted to comments made by Fed Chair Powell. There was plenty of market-moving action last week, so let’s get to it with a quick update!

Tallying last week, the S&P 500 declined by 2.08%1, the NASDAQ 100 fell by 3.42%2, and the Dow Jones Industrial Average decreased by 2.60%3.

MAJOR U.S. EQUITY INDEXES

It has been quite the post-election rally, and equity markets took a breather last week. After the S&P 500’s biggest five-day rally in a year, major U.S. stock indexes sold off ahead of key monthly inflation data, with rising Treasury yields and a rising U.S. dollar as catalysts.

Federal Reserve Chair Jerome Powell’s comments about the future of interest rate cuts added to last week’s sentiment — more on that in a minute.

Mostly In-Line Inflation Data

According to the most recent metrics released last week, inflation remained mostly unchanged in October but was slightly warmer than the previous month’s reading.

Consumer Price Index data showed a monthly increase of 0.2%4 in October, matching consensus expectations. This equaleda 2.6% year-over-year inflation rate, higher than the previous month’s 2.4% reading — so in line, but warm.

Core CPI, which excludes food and energy, also rose in line with expectations, tacking on 0.3% for the month and running at a 3.3% annual pace.

Once again, shelter costs were the primary factor contributing to the monthly rise in inflation, accounting for more than half of the increase. In October, shelter prices rose by 0.4% monthly and saw an annual increase of 4.9%. Despite an otherwise stabilizing inflationary environment, shelter pricing remains high.

Overall, the CPI data could be interpreted as in line with expectations, but with some overall stubbornness, as the data showed an overall rise from 2.4% in September to 2.6% in October.

CPI Market Reaction

Major U.S. stock indexes rose slightly on the morning of the data release, as the report suggested firming up expectations for a 25 basis point rate cut at the December meeting. The odds of such a rate cut moved higher on the data release day to around 82%.

But the mood of the markets would shift the next day, with Powell dampening expectations of a rate-cutting Fed. 

PRODUCER PRICE INDEX (PPI)

Producer pricing (wholesale pricing) showed a rise of 0.2% in September, matching Dow Jones estimates5. Similar to CPI, this wholesale inflationary data came in at expectations, but it was still a rise from the previous month’s reading. 

Verdict: Inflation is at expectations, but pockets of warmth are on the minds of many. Later in the day on Thursday last week, major U.S. equity indexes would trade lower —  not as a direct response to PPI, but more due to Fed Chair Powell’s comments below.

FEDWATCH: POWELL COMMENTARY

With market reaction to CPI and PPI in progress, Powell tempered rate-cut hopes during a meeting at a speaking engagement titled “Global Perspectives” hosted by the Federal Reserve Bank of Dallas later in the day Thursday.

Powell’s comments threw some cold water on risk assets and translated to a fading rally across major US stock indexes.

Comments included6 that the Fed doesn’t need to be “in a hurry” to lower rates.

While Powell mentioned the economy is still strong, his comments were deemed as hawkish by the market at large, and rate-cut hopes diminished rather significantly.

At the close of last week’s trading, futures traders showed a 61.9% probability of a 25-basis-point cut at the December Fed meeting, according to the CME FedWatch tool7.

Gathering consensus elsewhere, opinions are divided, and we will have to see what the Fed does — or says next. We are well aware that the Fed is “data-dependent,” and with inflation persisting and uncertainty surrounding the labor market, we need more data to get a read.

GOVERNMENT BOND YIELDS RISE

As major stock indexes fell last week on hawkish Fed commentary and open-to-interpretation inflation data, government bond yields rose.

Ten-year note yields gained around 12 and a half basis points to end the week near 4.429%8, the highest weekly close since June.

Two-year note yields also moved higher, although not as much as the 10-year yield, gaining around 5 basis points, closing the week near 3.584%.

Perhaps recent pricing behavior in government bonds over the last couple of months was predicated upon the Fed getting more hawkish like we saw last week. 

GOLD LOSES LUSTER

Gold bulls have been hibernating since the election after the shiny yellow metal touched all-time highs in the spot market pre-election near $2,790 per troy ounce. Spot gold closed near $2,563 per troy ounce9 last week, still higher by a handsome percentage for the year so far.

Reduced political uncertainty surrounding the election outcome and flows into equities could have given gold bulls some room for pause in the short term.

THE TAKEAWAY

We just had a monster post-election rally featuring the S&P 500’s best five-day stretch in a year. CPI and PPI data are constructive in that the inflation battle has been fruitful and productive, but there is room for interpretation on both sides of the argument in the eyes of the market. 

The Fed sounded hawkish, and rate cut probabilities dwindling somewhat last week didn’t leave market bulls with much to hang onto temporarily. But we have come far rather quickly. Profit-taking is bound to occur for shorter-term traders. For long-term investors, however, the beat goes on until the next narrative takes form. 

Let’s also be mindful that the interest rate markets have been telling us something for the last couple of months, as rates have risen in the open market. Even though the recent narrative has been for more rate cuts to come, the move higher in rates has been stubborn. So, an adjustment in market pricing for many assets was bound to occur. Let’s see what we get next.

As always, if there is anything on your mind regarding the markets and the latest developments, shoot us an email or give us a call! We are always here as a resource for you.

The PensionmarkMeridien Team may be reached at 866-871-9963
or
meridienteam@pensionmark.com

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:
1.            Trading View, November 16, 2024
2.            Trading View, November 16, 2024
3.            Trading View, November 16, 2024
4.            CNBC, November 13, 2024
5.            CNBC, September 12, 2024
6.            CNBC, November 14, 2024
7.            CME Group, November 2024
8.            Trading View, November 16, 2024
9.            Trading View, November 16, 2024

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Thanksgiving Comes Early

Written by support@seostats.com on . Posted in Events.

Through the collective efforts of our amazing PensionmarkMeridien team, we came together to assemble 13 Thanksgiving baskets, an extra box filled with items people may need for Thanksgiving meals and 14 bags of essential food for Westbay Community Action, Inc in Warwick RI. This initiative truly highlights the power of team spirit and our commitment to supporting our local community.

A heartfelt thank you to everyone who contributed!

Together, we are not just giving back; we are making a meaningful difference in the lives of those around us this holiday season.

 

Monthly Economic Update: November

Written by support@seostats.com on . Posted in Monthly Newsletter, Newsroom.

In this month’s recap: Mixed data into November election

Presented by The PensionmarkMeridien Team, November 2024

There was no shortage of market activity in October, with corporate earnings, a looming presidential election, and heavily scrutinized labor market data in the spotlight. Monthly payroll data showed extreme weakness on November 1st to get the fresh month started, but the U.S. stock indexes didn’t mind too much on the first day of the trading month. We will see how markets further digest this data. 

Tallying October (traditionally known as the most volatile month of the year), the S&P 500 fell by 0.99%1, the NASDAQ 100 shed 0.85%2, and the Dow Jones Industrial Average was lower by 1.34%3. 

EARNINGS SEASON UNFOLDS

Earnings results for the third quarter have been mixed4 thus far, with some Magnificent 7 companies’ results disappointing and some results pleasing investors.

Shares of Meta and Microsoft fell on earnings (primarily because of future guidance, as earnings beat estimates) and sent a sour vibe through tech stocks during the last week of October. In contrast, shares of Amazon rose on positive results and provided a much-needed boost in sentiment to end the week.

As of November 1st (with 70% of S&P 500 companies reporting actual results), 75% of S&P 500 companies have reported actual earnings per share (EPS) above estimates. In aggregate, these S&P 500 companies are reporting earnings that are 4.6% above estimates, below the five-year average of 8.5% and below the 10-year average of 6.8%, according to data5 from FactSet.

Earnings season will continue into November.

INFLATION: MIXED

Inflation data was mixed in October.

CONSUMER PRICE INDEX (CPI):
Data showed a slight warming in inflation on the consumer level. September data, released in October, showed a monthly increase of 0.2% – 0.1% higher than estimates. Annually, the inflation rate was 2.5% year-over-year, the lowest since February 20216 but still a tick higher than Dow Jones consensus estimates for 2.4%.

Core CPI, which excludes food and energy, tacked on 0.3% for the month versus expectations for 0.2%, putting the annual core CPI rate at 3.3%.

Once again, shelter and food prices were the main culprits for the rise in overall consumer inflation, accounting for more than three-quarters of the rise in the all-important consumer inflation metric.

PRODUCER PRICE INDEX (PPI):
Producer pricing (wholesale pricing) data for September, released in October, showed no change, coming in below Dow Jones estimates7 for a 0.1% monthly rise. Major stock indexes reacted positively to the data on the day of the data release.

CORE PERSONAL CONSUMPTION EXPENDITURES (CORE PCE):
Ending the month of October, we got mixed Core PCE price index data:

  • The annual core inflation rate held at 2.7% versus forecasts for a dip to 2.6%.
  • The personal consumption expenditures (PCE) price index increased by 0.2%, aligning with the consensus forecast. 
  • The 12-month headline inflation rate decreased to 2.1%, which matched estimates and was the lowest headline PCE inflation rate since February 2021.

It remains a mixed picture regarding inflation at the present time.

LABOR MARKET

This data has been driving markets, and a twist and turn surfaced on the November 1st data released. But before we get into that, let’s lay the foundation.

The Federal Reserve implemented its first rate cut of 50 basis points in September in response to weakness in labor market data.

SEPTEMBER LABOR DATA (OCTOBER 7TH DATA RELEASE):
The first labor market data after the Fed’s rate cut was on full display, with 254,000 jobs created8 versus Dow Jones estimates for 150,000. The unemployment rate declined by a tick to 4.1% from the previously reported month.

Verdict at the time: The economy is hot —  is it too hot? That would change in the next data release. 

OCTOBER LABOR DATA (NOVEMBER 1ST DATA RELEASE):
Only 12,000 jobs were created in October, and August and September totals were revised lower by 112,000 combined — not great for the labor market, but maybe good news for rate cut watchers.

The lowest monthly job creation total since 2020 was perhaps somewhat expected, with the effects of Hurricanes Helene and Milton taking their toll last month on the labor market.

As disappointing as the data was, major U.S. equity indexes held together well on the day of, with the Nasdaq, Dow, and S&P 500 all having a positive day.

BULLISH SEASONAL STRENGTH?

Historically, November and December are a strong time of year for U.S. equities. 

After October’s dismal yet resilient showing for U.S. stock indexes, market watchers were debating the opportunities in stocks at the start of November, given the inherent uncertainties.

According to 2022 data9 from CFRA Research, the S&P 500 has risen in 60% of Octobers, 66% of Novembers, and 77% of Decembers since 1945.

AN IMPORTANT REMINDER

With the election and Fed meeting occurring the first week of November, it’s good to remember that emotions can often lead long-term investors to make hasty decisions that may harm their portfolios in the long run. Consider what happened in 2020 as a prime example. 

Timing the market is incredibly challenging. This is why we emphasize the importance of long-term investing. It’s crucial to remember this not only during market downturns but also during periods of market growth.

As always, if you have any questions or needs, do not hesitate to reach out. 

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Do you want to receive articles like this or Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:
1. Trading View, October 31, 2024
2.            Trading View, October 31, 2024
3.            Trading View, October 31, 2024
4.            FactSet, November 1, 2024
5.            FactSet, October 27, 2024
6.            CNBC, October 10, 2024
7.            CNBC, October 11, 2024
8.            CNBC, October 4, 2024
9.            Money.com, September 30, 2022

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Quarter 3 Economic Review

Written by support@seostats.com on . Posted in Newsroom.

This quarters recap: Volatility, climbing indexes, and rate cut

Presented by The PensionmarkMeridien Team, October 18, 2024

As we head into the final stretch of 2024, I wanted to offer an overview of key developments that occurred in the third quarter. 

S&P 500: FOUR STRAIGHT POSITIVE QUARTERS

It’s four positive quarters in a row for the broadest measure of the U.S. economy, the S&P 500,with a remarkable seven out of the last eight quarters in the green1. Long-term investors have been rewarded (and perhaps spoiled a little bit, dare I say!) for the last year or two.

Regardless of the headlines that have come our way for the last eight quarters (think inflation, high interest rates, government shutdowns, etc.), the broader equity indexes continued to climb.

For the third quarter of 2024, the S&P 500 increased by 5.53%,2 the NASDAQ 100 rose 1.92%3, and the Dow Jones Industrial Average jumped by 8.21%4, as industrials outperformed.

BROAD ECONOMY

Expectations for lower rates combined with declining inflation remain front and center. The Fed highlighted a “recalibration” message at the last policy meeting, tying the rate cut to a need to stimulate the labor markets as opposed to being a response to a struggling economy. 

A 50-basis-point cut is in the books, and the number one question on the minds of the investment community is …

SOFT, HARD, OR NO LANDING? 

The rate hike cycle appears to be over, and the Fed’s intended consequences of quelling inflation have seemingly come to fruition in the form of a slowing labor market. Simultaneously, we have seen inflation drop over the last three months, according to multiple metrics.

Now, the Fed is looking to thread the needle by adding some steam into the labor market, but not too much and not too little — essentially creating a Goldilocks scenario of “just right.”

A recession remains a possibility. But there aren’t too many talking about a recession to start the third quarter, as the fresh rate cut creates loosened-up lending markets and provides a dose of stimulus into the economy.

With that said, it’s October and an election year, so anything is possible.

INFLATION SOFTER FOR THE THIRD QUARTER 

Consumer Price Index: June consumer pricing, released in July, actually fell on a monthly basis, with data showing a 0.1% monthly decrease from May, two ticks lower than the Dow Jones estimate for a 0.1% monthly increase. 

July consumer price Index data showed continued cooling for the month, with the annual inflation rate slowing to 2.9%. The interest rate cut case became more likely.

Finally, August Consumer Price Index data revealed a 0.2% increase in monthly CPI, resulting in an annual increase of 2.5% — the lowest annual inflation rate since 2021 and a 0.4% decline from the previous month. These data releases helped cement the inflation-cooling theme as markets waited on the September Fed meeting, which resulted in a 50-basis-point cut. 

AUGUST VOLATILITY SPIKE 

While the quarter was positive yet again, it wasn’t without some volatility early in the quarter – and what a volatility spike that was. Even more to marvel at was the speed of its dissipation.

The Japanese Yen carry trade5 wreaked some havoc on world financial markets in early August. The effects were felt worldwide but were short-lived. 

After spiking above $606, the S&P 500 Volatility Index ($VIX) settled the first week of August’s trading near $20.37. This volatility spike will go down in history books.

LABOR MARKET CONCERNS

As mentioned, labor market concerns popped up in a big way in the third quarter. There were substantial revisions to previously reported labor market data to the tune of 818,000 jobs revised downward over the preceding 12-month period.

Looking at the three non-farm payroll prints during Q3, we see:

  • 206,000 jobs were created in June, in line with estimates, but this is when downward revisions began to the tune of 111,000 downward revisions in April and May.
  • 114,000 jobs were created in July vs.185,000 forecast, a sharp slowdown from June data. Unemployment increased to 4.3%, indicating additional slowdown in the labor market as a whole.
  • 142,000 jobs were created in August vs.161,000 forecasted. There was a notable spike in unemployment.

EARLY SEPTEMBER VOLATILITY

In response, there was some more market volatility in early September, but this pessimism was short-lived. The Fed cut rates by 50 basis points, and the worries faded to black in the eyes of major stock indexes again — at least for now.

Labor market concerns are valid, especially when factoring in the revisions to previously reported labor market data. But we’ll see if the medium-term effects of the rate cut result in some strengthening of the employment markets in the fourth quarter. 

Could the rate cut result in a pickup in inflation that everyone is feeling is in the rear-view mirror? It’s possible — we will see if the Fed can thread this narrow needle.

FED OUTLOOK 

At the end of third quarter, markets were pricing in a 64.7% probability of a 25-basis-point cut and a 35.3% chance of a 50-basis-point cut at the November meeting, per the CME FedWatch Tool7.

There is a general consensus of 50 basis points of further rate cuts in 2024, as suggested by Federal Reserve Chair Jerome Powell himself at a September 30th conference at the National Association for Business Economics. 

Remember, however, that the Fed is heavily data-dependent, so additional CPI prints will be considered. 

TREASURY YIELD NORMALIZATION

After being inverted for the longest period in history (793 days), the 2/10 yield curve finally uninverted/normalized in September. This means that the 10-year yield is once again higher than the 2-year yield at long last.

The 2/10 yield curve normalization has various interpretations, one of which is that it’s a historical indicator of recession. Yet, other interpretations exist.

MOVING FORWARD

The fourth quarter is usually a good one.  But it is still a highly Fed-centric market, with an impending election that will have no shortage of headlines and narratives. But, as long-term investors, we look beyond that.

If headlines dictated market performance, long-term investors wouldn’t be in the position they are in today given the headlines over the last couple of years! Food for thought.

With that said, if third-quarter market developments are on your mind or if there is anything else We can help with, please feel free to contact us at the email address or phone number below.. 

We are always here as a resource for you.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Do you want to receive articles like this or Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:

1) Trading View, October 1, 2024
2)Trading View, October 1, 2024
3)CME Group, October 7, 2024
4)Trading View, October 1, 2024
5)Trading View, October 1, 2024
6)CNN, August 7, 2024
7)Trading View, August 11, 2024

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.


Economic Update for the Week of October 14

Written by support@seostats.com on . Posted in Newsroom.

In this week’s recap: mixed inflation, “janky” data

Presented by The PensionmarkMeridien Team, October 16, 2024

All eyes were focused on Consumer Price Index (CPI) data released last Thursday, as traders wanted to see the next chapter of the inflation narrative. The second trading week of (the usually volatile) October is in the books, and it was a good one for major stock indexes.

Summarizing last week’s trading, the large-cap S&P 500 gained 1.11%1, the NASDAQ 100 increased by 1.18%2, and the Dow Jones Industrial Average increased by 1.21%3.

MIXED INFLATION DATA 

Data showed a slight warming in inflation on the consumer level, with a monthly increase of 0.2% — a tick higher than estimates. The month brought a 2.5% year-over-year inflation rate, which was the lowest reading since February 2021 but still a tick higher than Dow Jones consensus estimates for 2.4%.

Core CPI, which excludes food and energy, tacked on 0.3% for the month versus expectations for 0.2%. The annual core CPI rate was at 3.3%.

Once again, shelter and food prices were the main culprits for the rise in overall consumer inflation, accounting for more than three-quarters of the rise4 in the all-important consumer inflation metric.

JANKY INFLATION DATA?

If you are a fan of financial buzzwords, this one’s for you. Let’s add “janky” to the list!

In an interview last week, Atlanta Federal Reserve President Raphael Bostic mentioned that it is important to see if individual data points form a larger pattern or if there are just some “janky” data points5 (in reference to the September CPI data and jobs reports coming in hotter than expected).

Bostic, a voting member of the Federal Open Market Committee (FOMC), mentioned that the choppiness in recent data ”is along the lines of maybe we should take a pause in November” when referring to rate cuts.

So far, traders interpreted the warmer-than-expected CPI data in a “janky” way as well, with traders increasing their bets on a rate cut. Investors may be banking on the Fed continuing with its plans to continue to cut rates, despite inflation showing some quick signs of inching higher. Since the Fed just started with rate cuts about three weeks ago, the consensus may be for the Fed to stay the course and not deviate based on a few data points.

It is a dynamic time now. It’s October, data is up for continued interpretation, and the election is right around the corner.

CPI MARKET REACTION

Major U.S. stock index futures initially sold off upon the data release6 at 8:30 a.m. ET and traded lower for about half of the New York trading session, as the report indicated a run-of-the-mill 25-basis-point cut at the November meeting. However, the S&P 500 held its lows made upon the data release and closed the day very close to where it was before the CPI data release.

It was an interesting reaction to the data, as market participants figured out how a higher tick inflation print could affect the Fed at the next meeting. So, after an initial stumble reaction to the data and digestion, the S&P 500 found its footing on the day of the data release.

PRODUCER PRICE INDEX (PPI) DATA

The day after CPI was released, wholesale pricing showed no change in inflation, coming in below Dow Jones estimates7 for a 0.1% monthly rise. Major stock indexes reacted positively to the data and continued their upward journey, having a positive day to close out last week.

The most recent data for September puts the annual PPI rate at 1.8% and is constructive in the inflation easing theme. 

THIS WEEK

October is in full swing, and the major U.S. equity markets have done well so far, as we enter the meat of the month. With CPI and PPI out of the way for October — and data showing a slight uptick in consumer pricing combined with flat producer pricing — attention this week turns to retail sales data in an otherwise quiet economic data release week. 

Perhaps more time will need to pass for the markets to digest the recent inflation data.

As always, if there is anything on your mind regarding the markets or your long-term investing strategy, please feel free to reach out to us.

We are always here as a resource for you. 

The PensionmarkMeridien Team may be reached at 866-871-9963 or meridienteam@pensionmark.com

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:
1.            Trading View, October 12, 2024
2.            Trading View, October 12, 2024
3.            Trading View, October 12, 2024
4.            CNBC, October 10, 2024
5.            CNBC, October 10, 2024
6.            Trading View, October 13, 2024
7.            CNBC, September 12, 2024

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Monthly Economic Update: October

Written by support@seostats.com on . Posted in Monthly Newsletter, Newsroom.

In this month’s recap: 50-basis-point rate cut boosts stocks

Presented by The PensionmarkMeridien Team, September 2024

Long-term investors with diversified portfolios had a solid month in September, as the S&P 500 rose for three consecutive weeks. As a bonus, the recent stock index rally was further fueled by a Federal Reserve (Fed) that delivered on a 50-basis-point rate cut.

With the major U.S. equity market indexes continuing their impressive overall upward trajectory since May, now is the perfect time to inform you about key developments over the course of the last month.

MAJOR STOCK INDEXES

The recent stock market rally continued for another month, but it wasn’t without some fireworks at the beginning of the month over labor market concerns.

Amazingly, the S&P 500 had its worst week of 2024 to start the month. Yet by month’s end, it was another month in the green. It is truly amazing how the volatility has come and gone so quickly this year.

Overall, for the month of September, the S&P 500 added 2.02%1, the NASDAQ 100 tacked on 2.48%2, and the Dow Jones Industrial Average was higher by 1.85%3.

FED RATE CUT

In September, the Fed delivered the hugely anticipated rate cut in the form of a 50-basis-point cut to the overnight lending rate, leaving the Fed’s target rate between 4.75 – 5.00%. The rate cut is the first in four years, and the market response was supportive.

Heading into the Fed rate decision, a rate cut was widely expected, and it was just a matter of whether it would be 25 or 50 basis points. The Fed went in the more aggressive direction.

FED MARKET REACTION & EXPECTATIONS

Market reaction to the Fed rate decision the day after the announcement was bullish and was on full display, as the Dow and S&P 500 jumped to record high levels. According to the Fed’s Summary of Economic Projections (SEP), 50 basis points of additional cuts are now expected for 2024, a more dovish and accommodating stance than previously thought.

FED RECALIBRATION

Are you looking for a new financial buzzword? Fed “recalibration” is here! This term originated at the Fed press conference following the interest rate decision.

The message is one of strength surrounding the state of the economy, indicating that the large 50-basis-point rate cut was not executed due to economic weakness, but rather to shore up the labor market .

Markets interpreted the message in the intended fashion, as asset prices soared4 the day after the Fed announcement and recalibration message.

SOFTER U.S. INFLATION READINGS

The overall trend for inflation saw some further cooling in September to the delight of stock market bulls.

CONSUMER PRICE INDEX (CPI):

The most recent CPI data released in September (August data) showed inflation continuing to cool on an annualized basis, coming in right at expectations. The report revealed a 0.2% increase in monthly CPI, resulting in an annual increase of 2.5% — the lowest annual inflation rate since 20215. Markets liked it.

Prices of goods and services are still elevated; we don’t need government data to let us know that! But we are making great strides toward the Fed’s 2% inflation target. Many analysts expect the overall inflation-cooling trend to continue, but let’s see how the 50-basis-point cut affects it!

CPI MARKET REACTION:

Markets initially lost some ground upon the CPI data release in September, with the Dow falling 743 points intra-day before mounting its largest intra-day comeback in almost two years.

The trading action came as a result of traders and investors trying to figure out if the data would edge the Fed toward a 25- or 50-basis point cut and whether such an action would translate to a soft or hard landing.

Well, we got the 50 basis points at the Fed meeting, and the current consensus and market reaction is one for a soft landing.

PRODUCER PRICE INDEX (PPI):

The day after we got CPI,  producer pricing (i.e., wholesale pricing) was released and showed a rise of 0.2% in August, matching Dow Jones estimates. Major stock indexes came into the day of the release higher from the previous day’s CPI print and continued their upward journey that day.

PERSONAL CONSUMPTION EXPENDITURES (PCE):

The freshest piece of inflation data came towards the end of September in the form of the Fed’s preferred inflation gauge, PCE.

Data showed pricing coming in below expectations6, with prices rising 2.2% annually and only 0.1% for the month versus expectations for 0.2%.

2.2%, psychologically, is very close to the Fed’s goal of 2%, and the encouraging data print on the inflation front paves the way toward a rate-cut-friendly Fed in the future.

MIXED LABOR MARKET DATA 

September’s monthly jobs report showed another decline in job creation, with 142,000 jobs created in August vs. 161,000 forecasted. Unemployment declined on a monthly basis, however, to 3.9% versus 3.7% forecasted.

The data comes after recent revisions that triggered concern over the labor market. Over the last couple of months, we’ve seen downward revisions7 in previously printed job creation data, and they factored heavily into the Fed’s 50-basis-point rate cut decision to shore up the labor market.

TREASURY YIELDS & NORMALIZATION

The 2-year Treasury yield and the 10-year Treasury yield moved lower overall throughout the month, ending September near 3.803%8 on 10s and 3.645%9 on 2s.

Perhaps more important is the relationship between the 10-year and 2-year yields. We saw the 2/10 yield curve “uninvert” or normalize in September for the first time in 793 days, which represented the longest yield inversion in history. Yield inversion occurs when the 2-year Treasury yield is larger than the 10-year yield. 

Well, we are back to normal now. The 2/10 yield curve normalization has various interpretations, one of which is that it’s a historical indicator that portends recession. Yet, other interpretations exist based on where we are.

MIXED CONSUMER DATA

September retail sales data showed an increase of 0.1% in August10 amid varying expectations. After reaching a six-month high in August, consumer confidence dropped in September to 98.7 versus expectations of 103.9.

So, it was a mixed bag for the consumer last month. We’ll see how the Fed’s rate cut affects the consumer in upcoming data releases. 

THE TAKEAWAY

September featured a further continuation of the rally in anticipation of a Fed rate cut, and the market got what it wanted in the form of the 50-basis-point variety. Inflation data showed further signs of encouragement, although the labor market could use some help. We know the Fed has this in mind. 

The yield curve “uninversion” or normalization hasn’t commanded too much attention in the media, but we know it has occurred. Election Day themes are a topic of discussion and will continue to be until Election Day and beyond. 

Current expectations for 50 basis points more in cuts to come for the rest of 2024. How will the normalization of the yield curve intertwine with any potential further rate cuts? Time will tell.

As always, we’re dedicated to prioritizing long-term goals and strategy while keeping you apprised of current market developments.

If you have questions or concerns, feel free to reach out to us anytime. We are always here as a resource for you.

Wishing you a fantastic October,

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Do you want to receive articles like this or Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:
1. Trading View, September 30, 2024
2.   Trading View, September 30, 2024
3.   Trading View, September 30, 2024
4.   CNBC, September 19, 2024
5.   CNBC, September 11, 2024
6.   CNBC, September 27, 2024
7.   CNBC, September 6, 2024
8.   Trading View, September 30, 2024
9.   Trading View, September 30, 2024
10. Reuters, September 17, 2024

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Economic Update for the Week of September 23

Written by support@seostats.com on . Posted in Newsroom.

In this week’s recap: rate cut, S&P 500 record high

Presented by The PensionmarkMeridien Team, September 24, 2024

Financial markets welcomed the new lower benchmark overnight lending rate set by the Fed, with all-time-closing highs in the Dow and S&P 500 achieved.

Tallying the week, the S&P 500 increased by 1.36%1, a weekly closing high; the NASDAQ 100 rose by 1.42%2, and the Dow Jones Industrial Average rose by 1.62%3, also a record weekly closing high.

50-BASIS-POINT RATE CUT

Ask, and you shall receive (eventually)! Markets have wanted a rate cut for quite a long time now, and it was finally delivered last week. And it was not just a run-of-the-mill 25 basis points either. The Federal Open Market Committee delivered a supersized 50-basis-point rate cut in an effort to stimulate the labor market and continue economic expansion.

In an action that suggests inflation is in the rear-view mirror, Federal Reserve Chair Jerome Powell started the first monetary easing campaign in four years with a bang.

In the accompanying Fed Meeting press release, the Federal Reserve said4: “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

Powell created a brand new financial buzzword in the process: “Recalibration.”

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RECALIBRATION MANIFESTATION

Many of us remember financial buzzwords of the past, like inflation being “transitory,” which was not the case.

But a new word was born last week during the post-Fed rate decision press conference: recalibration5.

The concept behind this sure-to-hear-more-about word is simple, and it took market participants a day to fully interpret and digest. It could be interpreted as a message that the easing cycle (rate-cutting campaign) is not about the economy being in recession, but rather that it is designed to continue fueling the economic expansion.

Moreover, the Fed’s action was deemed appropriate for shoring up the labor market.

These developments mark some different messaging and different actions than history would suggest. Rate cutting near stock market all-time highs is not something that would seem probable based on traditional economics, but here we are.

RATE CUT MARKET REACTION

Markets loved the Fed rate cut action, with the S&P 500 reaching all-time highs on the day of the announcement but fading late in the day6.

However, in a” delayed fuse rally fashion” during the next trading session, the S&P 500 and Dow Jones Industrial Average reached fresh all-time daily closing highs.7

The most cited reason for the soaring asset values on the day after the Fed rate decision was Federal Reserve Chair Jerome Powell’s “recalibration” commentary.

The consensus at the time was one of rate cuts shoring up the labor market and continuing the economic expansion, versus the need to stimulate the economy as a whole due to recession. This equates to a soft-landing consensus being achieved, at least for now!

Let’s remember that the S&P 500 closed at a weekly all-time closing high.

TREASURY YIELDS / NORMALIZATION CONTINUES

The 2/10 Treasury yield curve normalization continued last week, with the 10-year yield closing the week yielding near 3.727%8, and the 2-year Treasury yield closing near 3.597%9.

So, the spread between 10s and 2s closed the week near 14 basis points10, its third consecutive week of positive yield normalization, or “uninversion.”

RETAIL SALES TOP ESTIMATES

August retail sales data also fueled investor optimism, with data showing a rise of 0.1% in August, compared to expectations for a 0.2% decline.

Some commentary indicated that the stronger-than-expected retail sales data combined with falling energy prices. Consumers continue to spend freely despite the slowing in the labor market. It’s unclear if this is a smart move. Credit card balances have increased explosively throughout the recent inflationary period, and many Americans are dealing with high interest rate balances.

But this is America, and we are good at spending! Hopefully, the rate cut from the Fed last week will reduce overall interest payments to those with variable APRs in the coming months.

THIS WEEK

The economic news continues this week, with consumer confidence data, final lGDP data, Chair Powell’s comments at the U.S. Treasury Market Conference on Thursday, and Core Personal Consumption Expenditures data, the Fed’s preferred inflation metric on Friday. 

Meanwhile, markets will continue to digest the recent interpretation of the Fed 50-basis-point rate cut. The more lenient lending environment should stimulate lending and generate additional activity in the financial markets.

As always, if you have any questions or would like to discuss your portfolio, do not hesitate to reach out either by email or phone.

We are always here as a resource for you.

The PensionmarkMeridien Team may be reached at 866-871-9963 or meridienteam@pensionmark.com

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:
1.            Trading View, September 21, 2024
2.            Trading View, September 21, 2024
3.            Trading View, September 21, 2024
4.            Federal Reserve, September 18, 2024
5.            CNBC, September 19, 2024
6.            Forbes, September 19 2024
7.            Yahoo Finance, September 22, 2024
8.            Trading View, September 22, 2024
9.            Trading View, September 22, 2024
10.         Trading View, September 22, 2024

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Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.