Trust Investment Management
November was a remarkable month for U.S. equities. The S&P 500 reached a new record high, rising 5.87% for the month and 28.07% for the year. U.S. small caps posted a colossal 10.97% in November boosting its year-to-date performance to 21.58%. The markets reacted favorably to the outcome of the election hoping deregulation, tax cuts, and declining interest rates will provide a tailwind for corporate profits. International equities did not fare as well, closing lower for the month partly over U.S. import tariff concerns. Fixed income experienced a similar outcome as U.S. bonds rose while global bonds closed lower.
As expected, the Fed lowered rates by 0.25% in November. Fed Chairman Jerome Powell delivered a speech mid-November. He seemed bullish on the recent performance of the U.S. economy stating that “our economy has been remarkably good, by far the best of any major economy in the world.” He added that “The labor market remains in solid condition. Inflation has eased substantially from its peak, and we believe it is on a sustainable path to our 2 percent goal.” While this is good news, it may prompt the Fed to slow its rate cutting pace. The CME Group’s current target rate probability is 72.1% for a 0.25% rate cut in December, and 71.2% that the federal funds target rate will be 3.75%-4.00% one year from now.
The S&P 500 Index quoted so frequently in the news is a market capitalization weighted index, with larger companies having a greater impact on the index. After reaching new all-time highs valuations seem stretched. However, the market rally appears to be broadening out from a handful of stocks to other members of the index. Additionally, FactSet reported that for 2025 analysts are predicting year-over-year earnings growth of 15.1%1. While the S&P 500 overshadowed the other asset classes so far this year, it is prudent to note the importance of diversification. Diversification is a critical component for reaching long-term goals while helping to minimize risk. In other words, it’s important not to put all of your eggs in one basket.
As the year comes to a close, we wanted to wish you and your family a festive holiday season and a new year filled with success. Thank you so much for allowing us to be a part of your financial journey.
1J. Butters, “S&P 500 Earnings Season Update,” FactSet, November 2024. [Online].
