We trust you had a delightful Thanksgiving Holiday! We certainly relished our holiday with friends, family, and an indulgent amount of turkey. As we gear up for the Holiday Season, we extend our warmest holiday wishes and wish continued good health for all your friends and family. Much like the joy of giving a gift to a loved one, November transformed into a performance that felt like a pleasantly surprising early Holiday Gift.
The presidential election results sparked a stock market rally in November, with investors concentrating on the incoming administration’s policy agenda and its effects. The S&P 500 rose +6.0%, marking the largest monthly increase since November 2023. All eleven S&P sectors experienced gains during the month, led by Financials and Consumer Discretionary, while healthcare and utilities lagged behind.
The bond market did not share the same level of enthusiasm, as Treasury yields increased post-election due to concerns about heightened fiscal spending, tax cuts, and potentially significant fiscal deficits under the forthcoming administration. Nevertheless, by the month's end, yields declined, and bonds ended the month with positive returns.
With Republicans gaining control of the White House, Senate, and House in January, the following two policy areas will undoubtedly be in focus as we assess potential market and economic impacts.
Tax Policy: The administration is anticipated to concentrate on extending the tax cuts enacted during the previous Trump term (Tax Cuts & Jobs Act-2017). This could boost economic growth and increase corporate profits, although it might significantly expand the fiscal deficit.
Trade Policy: The administration intends to use tariffs to promote U.S. interests in international affairs and renegotiate trade agreements. However, in the short term, tariffs could disrupt supply chains, slow economic growth, and compress profit margins.
As we look ahead, attention will be directed towards the Federal Open Market Committee (FOMC) meetings concluding on December 18th. This could offer further insights into how the Committee is interpreting current economic indicators like consumer sentiment, CPI, employment, and holiday spending data.
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