Tucker Financial Weekly Market Review: December 6th, 2024

Weekly Market Report: December 6th, 2024

Markets last week took in stride a relatively full economic calendar and some overseas political drama in Asia (South Korea), Middle East (Syria), and Europe (France). Upbeat narratives surrounding the holiday shopping season, renewed China stimulus sentiment, and measured cooling of the U.S. labor market translated to marginal gains across global equity markets with a narrow rally in the U.S. (+1%) and participation across both developed and emerging markets, both rising approximately 1.4%. Interest rates declined slightly with some curve flattening as short rates fell more than long rates. Commodities were relatively unchanged on the week with some weakness in oil/gas prices while the USD posted a marginal 0.30% gain for the week.

Market Anecdotes

• A new record high for the S&P 500 last week puts the headline index at a 28% gain for the year, a rally driven by large cap growth stocks but not one foreseen by most Wall Street strategists.
• Bespoke noted last week marked the two-year anniversary of OpenAI’s release of ChatGPT, a window where we’ve seen a remarkable boom in market caps, revenues, operating cash flows, and overwhelmingly unexpected earnings.
• The valuation gap created by small caps lagging large caps by 10% this year and 40% since the end of 2019 prompted a Furey Research Partners research note highlighting the strong historical probability (96%) of small caps outperforming large caps over the next five years.
• A new research piece from Robert Shiller titled “U.S. Crash Confidence Index” indicated a very high level of investor comfort and complacency, a cautious narrative amidst the current backdrop of record high equity markets.
• The market’s reaction to Friday’s jobs report may have been more focused on prior month revision announcements than the headline number given hurricane and strike related disruptions in the October report.
• A flurry of Fed speeches last week in advance of the blackout period echoed sentiments surrounding stubborn inflation sticking above target and tight but cooling labor markets.
• The U.N. FAO reported global YoY food prices up 5.7%, a concerning development for global stability as well as the consumer in general who experience food prices much differently than the simple year over year growth rate we monitor as investors.
• OPEC last week decided for a third time to push back unwinding production cuts to April of next year citing market fundamentals and likely the specter of U.S. production capabilities.
• A political crisis unfolded in South Korea last week with President Yoon targeting the opposition by declaring a crisis and attempting to instill martial law. Korea joins Russia-Ukraine, internal conflict in Syria, Israel-Iran armed conflict, and China-U.S. trade in the geopolitical risk landscape

Economic Release Highlights

• October Payrolls beat consensus (227,000 vs 211,000) while the Unemployment Rate increased to 4.2%. Average Hourly Earnings came in slightly ahead of forecast with MoM 0.4% vs 0.3% and YoY 4.0% vs 3.9%.
• The October JOLT Survey reported 7.744M openings, above the spot forecast (7.490M) and consensus range (7.287M to 7.550M) with a vacancy rate unchanged at 4.6%. The quits rate moved higher overall but remained steady in the private sector.
• The November ISM Manufacturing Index came in slightly above forecast (48.4 vs 47.6). The ISM Services Index came in below the spot forecast (52.1 vs 55.5) and range of estimates (54.0-57.5).
• The November JPM Global Manufacturing PMI improved slightly from 49.4 to 50.0 while the Services reading stayed at 53.1. The Composite reading climbed one tick to 52.4.
• The UofM Consumer Sentiment Index registered 74.0, slightly above the spot forecast while one-year forward inflation expectations increased from 2.6% to 2.9%.