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Contributors

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.

Line chart shows the 10-year and 2-year yields post-election results year-to-date.

Currencies

Following its biggest one-day appreciation in two years (+1.6%), the U.S. dollar paired back some gains.

This bar graph shows the U.S. dollar index daily price return from the start of 2022 to present.

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.

This line graph shows the Fed funds and implied Fed funds rate from 2015-present.

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.

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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

  • Past performance is not indicative of future results. You may not invest directly in an index.
  • 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.
  • Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment and reinvestment risk. Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss.
  • In general, the bond market is volatile and bond prices rise when interest rates fall and vice versa. Longer term securities are more prone to price fluctuation than shorter term securities. Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss. Dependable income is subject to the credit risk of the issuer of the bond. If an issuer defaults no future income payments will be made.
  • When investing in mutual funds or exchange-traded and index funds, please consider the investment objectives, risks, charges, and expenses associated with the funds before investing. You may obtain a fund’s prospectus by contacting your investment professional. The prospectus contains information, which should be carefully read before investing.
  • Investors should understand the potential tax liabilities surrounding a municipal bond purchase. Certain municipal bonds are federally taxed if the holder is subject to alternative minimum tax. Capital gains, if any, are federally taxable. The investor should note that the income from tax-free municipal bond funds may be subject to state and local taxation and the alternative minimum tax (amt).
  • 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.
  • Investments in emerging markets may not be suitable for all investors. Emerging markets involve 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 emerging markets can be more volatile.
  • Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.
  • Real estate investments trusts may be subject to a high degree of market risk because of concentration in a specific industry, sector or geographical sector. Real estate investments may be subject to risks including, but not limited to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrower.
  • Investment in alternative investment strategies is speculative, often involves a greater degree of risk than traditional investments including limited liquidity and limited transparency, among other factors and should only be considered by sophisticated investors with the financial capability to accept the loss of all or part of the assets devoted to such strategies.
  • Structured products involve derivatives and risks that may not be suitable for all investors. The most common risks include, but are not limited to, risk of adverse or unanticipated market developments, issuer credit quality risk, risk of lack of uniform standard pricing, risk of adverse events involving any underlying reference obligations, risk of high volatility, risk of illiquidity/little to no secondary market, and conflicts of interest. Before investing in a structured product, investors should review the accompanying offering document, prospectus or prospectus supplement to understand the actual terms and key risks associated with the each individual structured product. Any payments on a structured product are subject to the credit risk of the issuer and/or guarantor. Investors may lose their entire investment, i.e., incur an unlimited loss. The risks listed above are not complete. For a more comprehensive list of the risks involved with this particular product, please speak to your J.P. Morgan team.
  • As a reminder, hedge funds (or funds of hedge 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, and may involve complex tax structures and delays in distributing important tax information. These investments are not subject to the same regulatory requirements as mutual funds; and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any such fund. For complete information, please refer to the applicable offering memorandum.
  • For informational purposes only -- J.P. Morgan Securities LLC does not endorse, advise on, transmit, sell or transact in any type of virtual currency. Please note: J.P. Morgan Securities LLC does not intermediate, mine, transmit, custody, store, sell, exchange, control, administer, or issue any type of virtual currency, which includes any type of digital unit used as a medium of exchange or a form of digitally stored value.
  • The prices and rates of return are indicative, as they may vary over time based on market conditions.
  • Additional risk considerations exist for all strategies.
  • The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service.
  • Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.

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.

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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.

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