Alan Wynne
Global Investment Strategist
Market update
It’s old news by now, but Donald Trump was announced as President-elect Wednesday morning. We covered how Republican administration policies could affect markets in our election recap piece and our Chairman of Investment Strategy, Michael Cembalest, discussed election impacts and outlook here.
It was a catalyst-heavy week for markets, from U.S. elections to the Federal Reserve. Below, we get you up to speed on the market moves driven by the events that were.
Equities
U.S. large cap equities rallied to all-time highs. Wednesday’s +2.5% gain was the best one-day performance of 2024.
Industrials had their biggest one-day gain in two years, as markets anticipated what an “America first” agenda means for U.S. production.
Small caps were one of the beneficiaries on the week (Solactive 2000 +7.6%). Better growth and fewer regulations could aid the group.
Deregulation should remove hurdles for mergers and acquisitions (M&A) and help thaw frozen activity. That’s a big boost for financials. The large cap sector gained +5%, while the regionals gained +10.2%. The market is not just anticipating M&A, but also loan growth and less stringent capital buffers.
Fixed income
A GOP sweep (which most investors now expect) drove interest rates higher.
Yields on the 2-year (4.21%) and 10-year (4.36%) both jumped Wednesday (eight and 16 basis points, respectively) following election results, but have since partially retracted. Higher inflation and fiscal deficits may necessitate more compensation to invest in longer-maturity fixed income.
Currencies
Following its biggest one-day appreciation in two years (+1.6%), the U.S. dollar paired back some gains.
A focus on onshoring and securing U.S. supply chains, combined with tariff threats (tariffs would reduce U.S. demand for imports, and thus, foreign currency to pay for those imports, increasing the value of the dollar, all else equal) resulted in a bullish backdrop for the dollar relative to foreign currencies.
Commodities
Oil recaptured some gains after falling -9% in the month of September. OPEC+ delayed output hikes and the U.S. purchased oil to refill the strategic petroleum reserve. In the medium term, we think prices will be challenged given the likelihood of incentives for more production. We are likewise unexcited about energy equities.
Gold (-1.6%), which has reached several all-time highs throughout the year, took a step back. The move seemed to be driven by U.S. dollar outperformance, given the precious metal fared better when priced in foreign currencies.
Crypto
Bitcoin jumped to all-time highs, and now sits at $75,960 per coin. Markets were excited about potential deregulation and the increased institutional adoption that could come, leading to the +10% pop.
Spotlight
You might have missed it, but the Federal Reserve also met this week.
Our key takeaway? The easing cycle continues.
On the Federal Reserve
While overshadowed by the election in the media landscape, we believe that the Federal Reserve and corporate earnings are more important for financial asset returns than politics. Chair Jerome Powell seemed to agree, saying that “the election will have no effect” on policy decisions in the near-term. Here’s what happened in their latest meeting.
As widely anticipated, the Federal Reserve lowered their target interest rate range by 25 basis points to between 4.5 and 4.75%. The 25-basis point decision was unanimous among voting members after September’s 50-basis point cut.
According to Chair Powell, the risk to the Federal Reserve’s mandate (maximum employment and stable prices) is “roughly in balance”, meaning that the recalibration of the policy rate should allow the economy to maintain the strength of the labor market and make more progress on inflation. Over time, Powell said the path of policy will be moving lower towards “neutral,” with the speed and ultimate level still to be determined.
Powell is “feeling good about economic activity” and even with the interest rate reduction, policy is still restrictive. The labor market has cooled considerably from its overheated position. Inflation has moved down a great deal from two years ago and is on a sustainable path lower. The decision to move rates is just another step in securing the soft landing.
We see the Federal Reserve continuing to ease monetary policy towards the neutral rate. Futures markets believe that by the middle of next year, the committee will have cut the policy rate three times, with a 60% chance of a fourth cut.
What does that mean for investors?
Cash is already earning you less than it was a week ago and will likely be even lower in the coming months. We advocate for investors to position portfolios at their strategic neutral duration position. Core bonds can still provide diversification and defensive characteristics in a long-term allocation.
Additionally, a soft landing (our base case) is an environment where equities have historically performed well. We think that can continue to be the case this cycle. We prefer U.S. equities relative to the rest of the world, and see opportunities in industrials, utilities, tech and financials.
Lastly, for investors concerned about inflation, we see structural opportunities in infrastructure. Infrastructure, which has inflation-hedging characteristics, can support returns in a modestly higher inflation environment. Combined with the greater need to supply power for the artificial intelligence buildout (an estimated 2% additional power annually for the next decade), there are opportunities across power generation and power distribution, as well as digital infrastructure.
For any questions on how you can position your portfolio to achieve your goals, reach out to your J.P. Morgan advisor.
All market and economic data as of 11/8/2024 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.
Reach out to your Wealth Advisor to discuss any considerations for your current portfolio. If you don’t have a Wealth Advisor, click here to tell us about your needs and we’ll reach out to you.
DISCLOSURES
The information presented is not intended to be making value judgments on the preferred outcome of any government decision or political election.
Private investments are subject to special risks. Individuals must meet specific suitability standards before investing. This information does not constitute an offer to sell or a solicitation of an offer to buy. As a reminder, hedge funds (or funds of hedge funds), private equity funds, real estate funds often engage in leveraging and other speculative investment practices that may increase the risk of investment loss. These investments can be highly illiquid, and are not required to provide periodic pricing or valuation information to investors
Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment, and reinvestment risk.
The price of equity securities may rise or fall due to the changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Equity securities are subject to "stock market risk" meaning that stock prices in general may decline over short or extended periods of time.
International investments may not be suitable for all investors. International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Some overseas markets may not be as politically and economically stable as the United States and other nations. Investments in international markets can be more volatile.
Private Equity is typically composed of Venture Capital, Leveraged Buyouts, Distressed Investments and Mezzanine Financing, which are all generally considered to be high risk, illiquid investments designed to deliver larger expected returns than publicly traded securities as compensation for their greater risk. As a result, investing in Private Equity is not suitable for all investors.
Index definitions:
The Russell 3000 Index is a capitalization-weighted stock market index that seeks to be a benchmark of the entire U.S. stock market. It measures the performance of the largest 3,000 U.S. companies representing approximately 96% of the investable U.S. equity market.
The S&P 500 Equal Weight Index is the equal-weight version of the widely-used S&P 500. The index includes the same constituents as the capitalization weighted S&P 500, but each company in the S&P 500 EWI is allocated a fixed weight of the index total at each quarterly rebalance.
The Bloomberg U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
The Magnificent Seven stocks are a group of influential companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.
The Magnificent 7 Index is an equal-dollar weighted equity benchmark consisting of a fixed basket of 7 widely-traded companies (Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta, Tesla) classified in the United States and representing the Communications, Consumer Discretionary and Technology sectors as defined by Bloomberg Industry Classification System (BICS).
The S&P Midcap 400 Index is a capitalization-weighted index which measures the performance of the mid-range sector of the U.S. stock market.
The S&P 500 index is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
Bonds are subject to interest rate risk, credit, call, liquidity and default risk of the issuer. Bond prices generally fall when interest rates rise.
Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941–43 base period.
The Bloomberg Eco Surprise Index shows the degree to which economic analysts under- or over-estimate the trends in the business cycle. The surprise element is defined as the percentage difference between analyst forecasts and the published value of economic data releases.
The MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance.
The NASDAQ 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.
The Russell 2000 Index measures small company stock market performance. The index does not include fees or expenses.
We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.
The views, opinions, estimates and strategies expressed herein constitutes the author's judgment based on current market conditions and are subject to change without notice, and may differ from those expressed by other areas of J.P. Morgan. This information in no way constitutes J.P. Morgan Research and should not be treated as such. You should carefully consider your needs and objectives before making any decisions. For additional guidance on how this information should be applied to your situation, you should consult your advisor.
All companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context.
JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. Information presented on these webpages is not intended to provide, and should not be relied on for tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.
RISK CONSIDERATIONS
This material is for information purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). The views and strategies described in the material may not be suitable for all investors and are subject to investment risks. Please read all Important Information.
GENERAL RISKS & CONSIDERATIONS. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.
NON-RELIANCE. Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.
Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.
LEGAL ENTITY, BRAND & REGULATORY INFORMATION
In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.
J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.
Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.
This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.
J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document. JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.
Check the background of our firm and investment professionals on FINRA's BrokerCheck
To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products.
This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation.
This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC ("JPMS"). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.
INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED
J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.
Please read additional Important Information in conjunction with these pages.