Download the 11.22.24 Dynamic Market Update for advisors’ use with clients

By Kostya Etus, CFA®, Chief Investment Officer, Dynamic Investment Management

A Resilient Economy Spells ‘Higher for Longer’

We have had an interesting couple weeks in the markets. First, the week of the election we had a strong market rally of close to 5% for the S&P 500 with what has been called the “Trump Trade”. The following week, we had the “Trump Fade”, as the market experienced about a 2% drop as investors digested potential government policy implications, new inflation data and interest rate expectations.

Despite the volatility, the market is still up close to 25% for the year (ending Nov. 15, 2024) as we enter the holiday season which tends to experience seasonal support of continued strength. Let’s review some of the key factors impacting markets:

1. Inflation Moderating: The top news last week was consumer price inflation (CPI) for October from the U.S. Bureau of Labor Statistics. Overall CPI ticked up to 2.6%, in line with expectations, but higher than the previous month at 2.4%. We have come a long way from the 9% readings we were hitting in 2022, but this last leg of the marathon seems to be persistent as we try and reach the Federal Reserve’s (Fed) target of 2%.
2. Interest Rates Moderating: After the inflation report, Fed Chair Jerome Powell indicated there is no hurry to cut interest rates as the economy appears to be resilient. He reinforced the labor market remains healthy with a 4.1% unemployment rate, and economic growth is one of the strongest in the world. Market expectations are now pointing to a total of just three more interest rate cuts over the next year.
3. Stock Market Moderating: While the stock market has continued to reach all-time highs this year, volatility has been rising. It may not be surprising to see some moderation over the next few months as investors patiently wait to get more clarity around fiscal policy and monetary policy factors driving returns.

That said, the holidays are around the corner…

The Santa Claus Rally

One of the key questions on investors’ minds is, can the stock market continue growing at its current pace? One view is that the market may be overheated, and it may not hurt to let some steam out of the engine. Alternatively, we have had negative returns in three of the last four weeks, and perhaps there is more room to grow going into year end.

One factor supportive of continued strength nearing year end is seasonality. As previously discussed in June Market Update, “Are You Surprised by the Market?” there is an adage known as “Sell in May and go away” that suggests you come back just in time for the gifts the winter holidays have to offer.

Certainly, being away this summer would not have benefited investors, reinforcing the benefits of always being invested, but let’s look at historic average monthly returns for the S&P 500 for hints of what we may be able to expect going forward:

1. Higher Return Potential: The median monthly returns tend to suggest the winter months, generally returning more than 1% per month, tend to be more attractive than the summer months. That said, except for July, all months generate a positive return on average.
2. Higher Positive Potential: The frequency of positive returns also tends to favor the winter months, particularly December with a whopping 83% positive return batting average. That said, all months are close to or more than the 50% mark.
3. Staying Invested for the Long-Term: While some months may be stronger than others, the general trend is that markets tend to be positive over the long-term, regardless of the month. Likewise, over long periods of time, the market is certainly better than a coin flip. The best path to success is to stay diversified, stay balanced and stay invested to achieve your long-term investment goals.

Stay diversified, my friends.

Source: Bloomberg. 1988-2011. https://www.warriortrading.com/what-is-stock-market-seasonality/

As always, Dynamic recommends staying balanced, diversified and invested. Despite short-term market pullbacks, it’s more important than ever to focus on the long-term, improving the chances for investors to reach their goals.

Should you need help navigating client concerns, don’t hesitate to reach out to Dynamic’s Investment Management team at (877) 257-3840, ext. 4 or investmentmanagement@dynamicadvisorsolutions.com.

Disclosures

This commentary is provided for informational and educational purposes only. The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. This is not intended to be used as a general guide to investing, or as a source of any specific recommendation, and it makes no implied or expressed recommendations concerning the manner in which clients’ accounts should or would be handled, as appropriate strategies depend on the client’s specific objectives.

This commentary is not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation. Investors should not assume that investments in any security, asset class, sector, market, or strategy discussed herein will be profitable and no representations are made that clients will be able to achieve a certain level of performance, or avoid loss.

All investments carry a certain risk and there is no assurance that an investment will provide positive performance over any period of time. Information obtained from third party resources are believed to be reliable but not guaranteed as to its accuracy or reliability. These materials do not purport to contain all the relevant information that investors may wish to consider in making investment decisions and is not intended to be a substitute for exercising independent judgment. Any statements regarding future events constitute only subjective views or beliefs, are not guarantees or projections of performance, should not be relied on, are subject to change due to a variety of factors, including fluctuating market conditions, and involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond our control. Future results could differ materially and no assurance is given that these statements or assumptions are now or will prove to be accurate or complete in any way.

Past performance is not a guarantee or a reliable indicator of future results. Investing in the markets is subject to certain risks including market, interest rate, issuer, credit and inflation risk; investments may be worth more or less than the original cost when redeemed.

Investment advisory services are offered through Dynamic Advisor Solutions, LLC, dba Dynamic Wealth Advisors, an SEC registered investment advisor.

Photo: Adobe Stock