The Rolling Stones
Investors couldn’t “get no satisfaction” as a slew of earnings reports, economic data, and election anxiety combined to send stocks on a two-week losing streak to end October.
Microsoft and Meta were somewhat less than magnificent and the declines in their shares led the slide from October into the red, ending a run of five months of gains. Fellow “Magnificent” Apple missed quarterly revenue consensus estimates in key markets in China and in its services segment. On the other hand, Alphabet and Amazon reported strong results. The only positive sectors for October were Financials, Communications Services, and Energy.
The good news is that Equity markets worldwide are all over +20% for the last year and Bonds have returned about +10%, so there are a lot of things to be grateful for as we roll towards Thanksgiving. Hopefully there will not be too much discussion around the table about politics, but we will address it here.
The election not only increased trading volatility but was also mentioned on numerous earnings calls. Many companies cited a slowdown or pause in economic, business, or customer activity due at least in part to the election. Many of these companies expect business conditions to improve post-election.
The economic data reinforced estimates of U.S. Q3 GDP growth and the PCE (the Federal Reserve’s preferred inflation gauge). The October employment report surprisingly showed only 14,000 new jobs created, overall data suggesting a continued deterioration in the labor market. But this can also be attributed to the uncertainty around the election and the next White House’s policy agenda. As a result, the implied activity for the Fed is two more 25bps rate cuts in 2024 and four 25bps cuts in 2025.
“You can’t always get what you want, but if you try, sometimes, you might find you get what you need.”
Whether you are disappointed or excited with the 2024 election results, it is important to have context on what that has historically meant for your investments. Last month, we spoke to the historical returns going back to the JFK administration. All but two presidencies provided positive stock market returns.
Source: Morningstar and FRED, 7/24. Chart data as of 1962–6/30/24. Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment.
President-elect Trump’s platform features aggressive and potentially market-moving proposals. His plans include reducing corporate taxes, potentially to as low as 15%, which would likely provide a substantial boost to corporate earnings and equity markets. Additionally, his regulatory approach is expected to be more lenient, further supporting business interests and potentially stimulating economic growth.
However, his stance on trade, particularly his proposal to impose additional tariffs, could lead to higher inflation, slower economic growth, and diminished business confidence. These protectionist measures, while intended to bolster domestic industries, may strengthen the U.S. dollar, undermining the competitive advantages that the tariffs are designed to achieve.
For anyone interested in delving deeper into how elections impact the economy, the Fed, and the overall markets, this “Election Facts” article by Charles Schwab is a good read: https://www.schwab.com/learn/story/party-usa-election-facts.
From the Investments Desk at Journey Strategic Wealth
This material is distributed for informational purposes only. Investment Advisory services offered through Journey Strategic Wealth, an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). The views expressed are for informational purposes only and do not take into account any individual’s personal, financial, or tax considerations. Opinions expressed are subject to change without notice and are not intended as investment advice. Past performance is no guarantee of future results. Please see Journey Strategic Wealth’s Form ADV Part 2A and Form CRS for additional information.