11.4.24 Weekly Market Commentary
Week In Review
Despite some encouraging news regarding consumer confidence and inflation, the domestic equity markets could not overcome the headwinds of a faltering labor market, disappointing earnings results from several key mega-cap information technology companies, and swelling bond yields. The Conference Board Consumer Confidence Index for the month of October rose by more than 9% to 108.7, up from 99.2 in September and the biggest monthly increase since March 2021.3 Perhaps even more promising was the forward-looking Expectations Index, rising nearly 8% and far exceeding the level that might point to an impending recession. The release of the PCE Price Index for September was also optimistic, with the year-over-year inflation rate at 2.1%, close to the Fed target level. Unfortunately, that’s where much of the good news ended. The latest labor report was dismal, as the U.S. economy added a meager 12,000 jobs in October. Corporate earnings updates from bellwether companies Microsoft and Apple didn’t help much either, with deficient revenue guidance leading to a market selloff. The 10-year U.S. Treasury note yield continued its ascent, closing at 4.39%, and the S&P 500 declined -1.4%.
This Week
The economic calendar is light. That is fitting, since the results of the U.S. presidential election and the Federal Reserve policy meeting and interest rate decision will be top of mind for the nation. The Q3 earnings season picks up from last week with 103 S&P 500 companies providing updates. 4
Portfolio Themes
Not surprisingly, the higher the starting bond yield, the higher the future potential return. Over the last 25 years, an allocation to high yield bonds delivered a positive 1-year forward return 90% of the time if the starting yield was at least 7%. At month-end, the ICE BofA U.S. High Yield Index effective yield was 7.06%. 5 Simplicity offers model portfolios that hold high yield bonds, providing a higher payout potential than stocks with less risk.
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Data: Unless otherwise noted, data for charts, graphs, and tables is sourced from YCharts. Portfolio Themes chart sourced from Delaware Funds by Macquarie.
1 Style box returns use various Russell indices tied to specific areas of the market cap (vertical) and style (horizontal) spec trums.
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.
4 FactSet.
5 FRED Economic Data.
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 a dvice or recommendation. The information contained within has been obtained from various sources and is believed to be accurate at the time of publication.
