Week In Review

It was another record-breaking week for domestic financial markets. Corporate earnings reports were generally upbeat, with notable results from Morgan Stanley, but it was Taiwan Semiconductor Manufacturing Company’s stunning 54% surge in third-quarter profit that energized artificial intelligence stocks and lifted the equity markets to new highs. 3 Market sentiment garnered additional optimism from a U.S. retail sales update that was much stronger than expected, rising 0.4% in September. With initial jobless claims coming in below forecast as well, a soft landing for the economy still seems to be a plausible outcome. The S&P 500 index posted a sixth consecutive week of gains and hit a new high, rising +0.9%.

This Week

With a slight economic calendar, an upcoming U.S. presidential election, and a Fed interest rate decision on November 7th, the most important update may be the release of the Fed’s Beige Book, a qualitative look at current economic conditions. It was only six weeks ago that the Fed Beige Book for August added to slowdown fears as the number of districts with flat or declining activity rose from the prior period. It should be an interesting comparison to the current report given the recent rate cut and the uptick in both nonfarm payrolls and consumer spending. The Q3 earnings season continues, with 112 S&P 500 companies giving updates. 4

Portfolio Themes

Last week, we attempted to make an argument for a more defensive model portfolio that includes an allocation to bonds based on their historical performance after the first Fed rate cut. The September 2024 FOMC projection for the federal funds rate is 3.38% by year-end 2025.5 That suggests a 1.5% reduction may occur in the benchmark rate over the next 14 months from the current level. When interest rates fall, fixed income investments may increase in value. Simplicity provides access to bond portfolios that can deliver income and potential capital appreciation.

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Data: Unless otherwise noted, data for charts, graphs, and tables is sourced from YCharts. Portfolio Themes chart sourced from J.P. Morgan Asset Management.

1 Style box returns use various Russell indices tied to specific areas of the market cap (vertical) and style (horizontal) spectrums.

2 Index Statistics: P/E TTM – Calculated by dividing an investment’s price by the trailing 12-month earnings per share value. Yield – Expected dividend-per-share divided by current share price. Table statistics are updated monthly. MSCI indices represent broad global and international equity markets. Indices are represented by iShares ETF proxies (IVW, IVV, IVE, ACWI, and ACWX). Past performance does not guarantee future results.

3 CNBC.

4 www.lipperalpha.refinitiv.com.

5 www.federalreserve.gov. Weekly commentary and investment advisory services are provided by Simplicity Wealth, LLC a SEC Registered Investment Adviser. Registration does not imply a certain level of skill or training. The information provided is for informational purposes only and does not constitute any form of advice or recommendation. The information contained within has been obtained from various sources and is believed to be accurate at the time of publication.