- Last Week: New highs in the tech-heavy NASDAQ were offset by a few notable losing streaks in the markets
- Looking Ahead: This week is the Fed’s last meeting of the year and it is widely expected they will cut rates. This week also has a heavy economic calendar.
- Coming Around the Corner: As year-end approaches, investors should remain focused on maintaining balanced, diversified portfolios to navigate the opportunities and risks ahead.
Looking Back at Last Week
Last week, the tech-heavy Nasdaq reached a new milestone, crossing the 20,000 mark for the first time. The Nasdaq 100 is now up over 30% year-to-date, underscoring the ongoing strength in mega-cap technology stocks. However, it was a challenging week for other segments of the market. The Dow Jones Industrial Average declined for the seventh consecutive session, a streak last seen in February 2020. Additionally, for ten straight trading days now, the number of declining stocks outpaced advancing stocks in the S&P 500 —a rare occurrence not seen since 2001. Overall, global equities fell by 1% last week, led by losses in smaller-cap markets. Rising interest rates also weighed on bonds, with the Bloomberg Aggregate Bond Index dropping by over 1% as the 10-year Treasury yield climbed to 4.4%.
Despite last week’s challenges, balanced portfolios have performed well year-to-date. Global equities are up 20%, bonds have gained about 2%, and diversifiers like commodities and alternatives have added approximately 5% and 7%, respectively.
Inflation data released last week provided mixed signals. Core Consumer Price Index (CPI) inflation rose to 3.3% in November from 3.2% in October, matching consensus expectations but remaining far above the Fed’s 2% target. This marks the 45th consecutive month that inflation has exceeded the Fed’s target. In addition, core CPI has now been above 3% for forty-three straight months, its longest run of high inflation since the early 1990s. Meanwhile, core Producer Price Index (PPI) inflation ticked up to 2.9% from 2.8%, also exceeding expectations. The persistent inflation underscores the challenges ahead for monetary policymakers.
Looking Ahead This Week
This week, the Federal Reserve’s final meeting of the year will be a key focus for investors. While a 0.25% rate cut is widely anticipated, attention will also be paid to the updated "Summary of Economic Projections" (or "dot plots"), which will provide the Fed’s outlook for interest rates and the broader economy. Current market expectations suggest just two more short-term interest rate cuts in 2025.
On the economic calendar, retail sales data will offer insights into the strength of holiday spending, which has been robust so far. Additionally, the release of the core Personal Consumption Expenditures (PCE) index—expected to edge up from 2.8% to 2.9% year-over-year—will provide further clarity on inflation trends. Housing market updates, including building permits and existing home sales, will shed light on the real estate sector, which continues to contend with elevated mortgage rates.
Coming Around the Corner
Despite recent market softness, 2024 has been a strong year for investors. Stocks, home prices, and even Bitcoin are at all-time highs. The Fed’s anticipated rate cuts have fueled optimism, as reflected in sentiment surveys and fund flows. In November, U.S. equity funds saw a $140 billion net inflow—nearly double the second-highest monthly inflow since 2020. Some observers are calling this environment “Trumphoria,” a nod to heightened enthusiasm.
However, risks remain. The national debt is at an all-time high, and inflation, while moderating, remains stubbornly above target. As year-end approaches, investors should remain focused on maintaining balanced, diversified portfolios to navigate the opportunities and risks ahead.
Add it all up, stay invested, stay diversified, and stay disciplined. If you have any questions or comments, please let us know at strategists@brinkercapital.com or at rusty@orion.com. Thank you for your time and trust, and we will be back next week with another update.