Tucker Financial Weekly Market Review: November 22nd, 2024

Weekly Market Report: November 22nd, 2024

Market Anecdotes

• Equity markets again exhibited signs of internal rotation with small caps and cyclicals outperforming large technology names, an area where markets have placed remarkable valuation premiums over the past two years.
• Markets put a bow on the third quarter earnings season last week with 3Q YoY growth in the U.S. of approximately 7%, ahead of developed markets but behind emerging markets.
• FactSet looked at 3Q geographic based earnings data, challenged the idea that a strong USD translates to weaker earnings results for companies with larger international exposure highlighting that the 5.4% blended 3Q S&P earnings growth is comprised of U.S. centric companies who grew earnings by 1.9% and global companies growing at a 12.9% rate.
• The most recent VerityData tally of insider sales show activity at a record high, surpassing the last record high set in November 2016.
• NY Fed data on credit card delinquencies show the third quarter new delinquencies declined for the first time since 2021 by 0.26% to a still elevated 8.79%, a trend we’d like to see continue.
• Japan and China unloaded record sums of UST in 3Q adding to the trend of foreign central bank selling and foreign private investors buying, who have become the largest holders of U.S. debt.
• With continued upside economic surprises and FOMC minutes due this week, markets are viewing the probability of a December 18th rate cut as a coin toss with futures priced at 55% but swaps (OIS) priced at 41% and approximately three cuts expected over a year.
• A recent study from the SF Fed analyzed three measures of ‘labor tightness’ including vacancies to unemployment, vacancies to effective searchers, and headline unemployment concluding the former two remain one standard deviation above average while U3 is one below.
• Bloomberg reports the BLS will be releasing new labor market survey data that attempts to capture workers in the gig economy where estimates range from 5% to 30% of the total workforce.
• Viewing tariff issues as either China centric or ‘universal’ seems reasonable with the former most likely. A study from the Peterson Institute points out that while the economy can more readily absorb tariff inflation pressures, border issues and Fed independence are another story.
• Extending the TCJA will require approximately $3.9t over 10yrs before getting to Trump’s campaign promises. Strategists predict that it will be cut to 5yrs/$1.9t with 50% to the deficit and 50% offset, a portion likely sourced from ‘off budget’ executive action tariff tax revenue.

Economic Release Highlights

• November’s U.S. flash PMI (C,M,S) improved from the prior month and came in above forecasts at 55.3, 48.8, 57.0.
• November’s EU and U.K. flash PMI report (C,M,S) declined from the prior month and came in below forecasts with the EU at 48.1, 45.2, 49.2 and the UK at 49.9, 48.6, 50.0.
• The final reading for UofM Consumer Sentiment in November was revised lower from 73.0 to 71.8 while 1 yr inflation expectations were unchanged at 2.9%.
• November’s Housing Market Index registered 48, well above the prior month reading and spot consensus both of which were 43.
• Existing Home Sales in October came in at consensus 3.96M, up 3.4% MoM and 2.9% YoY.
• Housing Starts (1.311M) and Permits (1.416M) for October decreased slightly versus prior month but registered at the consensus forecast.