The Markets
There was a lot to celebrate last week!
The Standard & Poor’s 500 Index closed above 5,800 for the first time—and that’s not all.
The Dow Jones Industrial Average also notched a record high last week—and all three major U.S. stock indices ended the first full week of October with gains of more than one%.
There was good economic news, too.
- Inflation continued to slow in September. The Consumer Price Index showed headline inflation was 2.4% annualized—the smallest annual increase since February 2021.
- Consumers are feeling better than they did a year ago. “[Consumer sentiment] is currently 8% stronger than a year ago and almost 40% above the trough reached in June 2022,” reported University of Michigan Surveys of Consumers Director Joanne Hsu.
- The economy continues to grow. After inflation, the U.S. economy grew by 3 percent in the second quarter of 2024. Forecasts project that economic growth in the third quarter will be 3.2%.
- Wages have grown faster than inflation. In September 2024, average hourly earnings were up 4%. After inflation, they were up 1.5%. Of course, that’s a broad reading for the entire country and may not reflect individual experience.
“By just about every measure, the U.S. economy is in good shape. Growth is strong. Unemployment is low. Inflation is back down. More important, many Americans are getting sizable pay raises, and middle-class wealth has surged to record levels. We are living through one of the best economic years of many people’s lifetimes… The United States has nearly 7 million more jobs than it did before the pandemic, and the largest share of 25- to 54-year-olds working since 2001,” reported Heather Long of The Washington Post.
It's remarkable that many Americans still don’t recognize the strength of the economy. Last week, a Harvard Caps/Harris Poll found that, “63% of voters believe the U.S. economy is on the wrong track and 62% characterize it as weak, consistent with perceptions over the past year.”
Last week, major U.S. stock indexes finished higher. U.S. bonds appeared to be headed for a fourth-straight week of declines with the yield on a 10-year note above 4% again.
| Data as of 10/11/24 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
|---|---|---|---|---|---|---|
| Standard & Poor's 500 Index | 1.1% | 21.9% | 32.9% | 10.1% | 14.4% | 12.0% |
| Dow Jones Global ex-U.S. Index | -0.4 | 9.9 | 19.5 | 0.5 | 4.6 | 3.1 |
| 10-year Treasury Note (yield only) | 4.1 | N/A | 4.6 | 1.6 | 1.8 | 2.3 |
| Gold (per ounce) | -0.1 | 27.4 | 41.6 | 14.7 | 12.4 | 8.0 |
| Bloomberg Commodity Index | -1.2 | 2.2 | -2.2 | -0.6 | 5.0 | -1.7 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
It’s Policy That Affects Stock Markets, Not Politics
Although presidential elections can affect financial markets over the short term, it is the policies a new President introduces that influence economic growth and the stock market. Sometimes, policies lift the economy. Other times, they don’t. For example:
President Thomas Jefferson embargoed all trade with England and France, preventing U.S. ships from doing business with other countries. While he had sound reasons for pursuing the policy, “It decimated the economy… As many as half of the working men in the New England coastal communities were unemployed. Poor houses were overflowed, banks failed," reported WBUR.
The embargo was not popular. Eventually, American merchants found loopholes that allowed them to trade with Canada and Spanish Florida. Smuggling also increased.
President Abraham Lincoln had a profound impact on the United States economy. He led the country through the Civil War, and signed the Emancipation Proclamation, which led to the end of slavery and necessitated the adoption of new economic models.
Research from the University of Chicago suggests that “emancipation generated aggregate economic gains for the U.S. economy that were worth between 4 and 35% of U.S. GDP, making it, even at the low end of their estimation, one of the most important economic events in U.S. history—bigger than the introduction of railroads, by some estimates, and worth 7 to 60 years of technological innovation in the latter half of the 19th century.”
President Jimmy Carter faced an embargo—the Arab oil embargo of 1973. Demand for gasoline far outstripped supply in the United States, and Americans waited in long lines to fill their cars’ gas tanks. In response, the President developed energy conservation strategies.
“President Carter signed energy legislation that created the U.S. Department of Energy, provided incentives for renewables and coal, deregulated oil and natural gas prices, and banned new power plants from using gas or oil. Some of these policies have had a lasting effect. Others drew criticism and were ultimately repealed,” stated historian Jay Hakes on a Center for Global Energy Policy podcast at Columbia University.
While there are usually differences of opinion when new policies are implemented, the economic outcome is sometimes difficult to predict.
Weekly Focus – Think About It
“History is a jangle of accidents, blunders, surprises and absurdities, and so is our knowledge of it, but if we are to report it at all we must impose some order upon it.
—Henry Steele Commager, historian
Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
- The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
Sources:
https://www.barrons.com/market-data (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/10-14-24_Barrons_Data_1.pdf)
https://www.bls.gov/news.release/cpi.nr0.htm
https://www.bea.gov/sites/default/files/2024-09/gdp2q24-3rd.pdf
https://www.atlantafed.org/cqer/research/gdpnow
https://www.bls.gov/news.release/realer.t01.htm (Table 1a)
https://www.washingtonpost.com/opinions/2024/10/10/economy-great-year-election/
https://harvardharrispoll.com/press-release-sep-2024/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/10-14-24_Bloomberg_Bond%20Traders%20Big%20Week%20Ends%20With%20Fed%20Rate%20Cuts%20Even%20Less%20Certain_8.pdf)
https://www.wbur.org/radioboston/2012/06/15/new-england-succession
https://mises.org/mises-daily/jeffersons-disastrous-embargo
https://www.energypolicy.columbia.edu/jimmy-carters-energy-policy-legacy/
https://www.azquotes.com/quote/910113
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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