Market Commentary

Red

November 2024

Summary

• U.S. equities rallied post-election. Large-cap stocks rose 6%, and small-cap stocks increased by 11% in November. International equities not only underperformed but ended the month in the red.
• The Federal Reserve cut rates by 0.25% in November, and another 0.25% reduction is expected in December. Inflation edged higher in October, primarily due to rising housing costs.
• Donald Trump won the 2024 presidential election with 312 electoral votes to Kamala Harris’s 226, and the Republican Party gained control of Congress.
• The appointment of Scott Bessent to the Treasury brings a renewed focus on the deficit and better alignment with the Fed’s policy of trying to grow the U.S. out of massive deficits.

Overview

Markets posted mixed returns in November. U.S. large-cap stocks, represented by the S&P 500 index, ended the month up 5.9%, while the small cap Russell 2000 index ended the month up 11.0%. In contrast, international equities underperformed their U.S. counterparts and ended the month in the red. International developed market large cap stocks declined 0.6%, and emerging market stocks ended November down 3.6%. U.S. intermediate-term bonds, as represented by the Bloomberg U.S. Aggregate Bond Index, ended the month up 1.1%.

GDP estimates show the U.S. economy growing at an annualized rate of 2.8% quarter-over-quarter in the third quarter, supported by robust consumer and government spending. Consumer spending posted its best quarter so far this year as it increased by 3.5%, while government spending increased by 5.0%.¹ The services sector of the economy continues to expand, with the ISM Services PMI registering 52.1 in November.²

Although notably lower than its June 2022 peak of 9.0% year-over-year, inflation, as measured by CPI, remains sticky and above the Fed’s stated target of 2%. In October, headline inflation increased slightly to 2.6% year-over-year from 2.4% the prior month, while core inflation remained at 3.3% and has averaged 3.5% throughout 2024.³ Housing inflation continues to be the main driver of higher inflation, as the shelter component of inflation rose by 0.4% month-over-month (accounting for over half of all the monthly increase) and 4.9% year-over-year.³

October marked the start of the U.S. government’s 2025 fiscal year, and the budget deficit has already reached $257 billion—the second-largest October deficit since at least 1981, surpassed only by October 2020.⁴ The Congressional Budget Office projects the fiscal 2025 deficit will closely align with 2024 levels, hitting approximately $1.9 trillion.⁵ Net interest payments remain a substantial component of federal outlays at 14%.⁴

As widely anticipated, the Federal Reserve cut interest rates by 0.25% at the November Federal Open Market Committee (FOMC) meeting.⁶ Another 0.25% rate reduction is expected at the December FOMC meeting. This would bring the total rate reduction for the year to 1.0%.⁷ Given strong economic growth and sticky inflation, one 0.25% rate cut has been priced out for 2025, and markets expect the equivalent of three 0.25% cuts next year.⁷ On November 14, at a speech in Dallas, Fed Chair Jerome Powell stated that the Fed isn’t in a hurry to cut rates:

“I expect inflation to continue to come down toward our 2% objective, albeit on a sometimes-bumpy path… The economy is not sending any signals that we need to be in a hurry to lower rates.”⁸

Over 95% of S&P 500 companies have reported third-quarter earnings results. Earnings growth estimates improved over the quarter, increasing from 4.2% to 5.8%, primarily driven by a handful of mega-cap technology companies and select sectors, such as communication services (+23%), consumer discretionary (+9%), and financials (+7%).⁹ Full-year earnings growth for the S&P 500 in 2024 is projected to reach 9.4% due to significant contributions from the communication services, financials, and consumer discretionary sectors.⁹ Earnings growth estimates for 2025 are currently expected to be 15.0%, which would be the best growth rate since 2021, when it was over 35%.⁹ As of the end of November, the S&P 500’s price-to-earnings (P/E) ratio was at 22.5x, compared to 30.1x at the peak of the tech bubble. However, the top 10 S&P 50 companies account for 34.8% of the Index, compared to 25% at the tech bubble peak.¹⁰

Red

On November 6, with 277 of the 270 required electoral college votes, Donald Trump was announced the winner of the 2024 presidential election. By the final count on November 10, Trump amassed 312 electoral votes to Kamala Harris’s 226.¹¹ The Republican party has also kept control of the House and gained a majority in the Senate. Trump won each of the seven swing states, and the race in Pennsylvania—widely considered the key determinant—was called in the early hours of November 6. Exit polls showed that for the first time in at least twenty years, self-identified independents accounted for a larger share of voters (34%) than Democrats (32%) and were tied with Republicans (34%).¹² Trump is also the first Republican president to win the popular vote in twenty years.

Historically, markets tend to rally following elections as uncertainty subsides, and 2024 has proven no different. In fact, 2024 market returns are above average: between 1924 and 2020, U.S. large cap stocks have increased 2% during the month in which an election was held, while U.S. small cap stocks have increased 3%. In 2024, U.S. large-cap stocks gained 5.9% during election month, while U.S. small-cap stocks gained an impressive 11.0%. U.S. intermediate-term bonds also outperformed historical norms, rising 1.1% over the election month compared to the historical average gain of 0.5%.

While U.S. small-cap stocks outperformed large-cap peers by 4.1% since Election Day, they lag by an annualized 6.4% over the past three years. A similar pattern occurred when President Trump won the election in 2016 and small-cap stocks outperformed large-cap stocks by 7.6%. Historical precedent aside, small-cap stocks could benefit from contained interest rates, onshoring initiatives, and reduced regulation under the new administration. By the end of November, full-year 2025 earnings growth estimates for the Russell 2000 stood at 41%, compared to 15% for the S&P 500.

Long-term Treasury yields declined in November. After peaking at 4.5% on November 13, the 10-year Treasury yield ended the month at 4.2%. The bond market appeared to respond positively to the nomination of Scott Bessent as U.S. Treasury Secretary. Bessent has a decades-long career in finance, including his role as a partner at Soros Fund Management and as the founder of Key Square Group, both global macro hedge funds.^13,14 His platform includes advocating for tax cuts, reducing government spending (and deficits), strong national defense, targeted and gradual tariffs, and a focus on lowering inflation. Bessent has proposed a “3-3-3” target, aiming to achieve 3% economic growth, a reduction in the deficit to 3% by 2028, and an increase daily oil production by 3 million barrels, which is about a 20% increase from current levels.^15,16,17 When asked about his decision to accept the nomination, Bessent remarked:

“This election cycle is the last chance for the U.S. to grow our way out of this mountain of debt…”¹⁸

The new administration will usher in a more supportive regulatory regime for digital assets. Both Trump and Vice President-Elect J.D. Vance have expressed strong support for cryptocurrencies.^19,20,21,22 Bitcoin surged 39% in November and is up 119% year-to-date. With a pro-crypto administration taking office in 2025, expectations are rising for eased regulations on exchange-traded funds for cryptocurrencies, such as Ethereum and Solana.^23,24 There is also speculation about the establishment of a U.S. strategic bitcoin reserve.²⁵ Regulatory clarity introduced by the new administration could pave the way for broader institutional and advisory adoption of digital assets. This perspective is best captured by incoming Charles Schwab CEO, Rick Wurster, who recently stated that:

“We will get into spot crypto when the regulatory environment changes, and we do anticipate that it will change, and we’re getting ready for that eventuality.”²⁶

Markets

U.S. equity markets fared significantly better than their international counterparts in November. U.S. large-cap stocks ended the month up 5.9%, but international, developed-market, large-cap stocks saw red as they ended the month down 0.6%. Similarly, while U.S. small-cap stocks ended the month up 11.0%, international developed market small-cap stocks ended the month up 0.1%. Emerging market stocks ended November down 3.6%, driven by declines in Brazil, South Korea, and Taiwan. A similar pattern occurred in fixed income markets. U.S. intermediate-term bonds gained 1.1%, but international developed market bonds ended November up only 0.2%.

In geopolitical developments, on November 17 President Biden approved Ukraine’s use of U.S. missiles on Russian territory.²⁷ In response, Russian President Vladimir Putin signed a new doctrine on November 20, lowering the threshold for deploying nuclear weapons.²⁸ After climbing to $72.5 per barrel on November 5, West Texas Intermediate (WTI) crude ended the month $4 lower on news of a ceasefire between Israel and Hezbollah in Lebanon, which came into effect on November 27. By early December, the ceasefire was in a precarious state due to exchanges of fire from both sides.²⁹ Gold ended the month down 4.1%.

Looking Forward

With a decisive red sweep, market participants have more clarity on the direction of U.S. policy. Most importantly, the appointment of Scott Bessent to the Treasury brings a renewed focus on the deficit and better alignment with the Fed’s policy of trying to grow the U.S. out of massive deficits. This, in turn, could keep longer term interest rates contained, which would not only help support elevated equity valuations but also buy time for policy measures to be implemented and further shape the economy.

Given this landscape, we maintain that diversification should include healthy exposures to risk, minimal longer-term bonds (given that upside appears limited), and hedges against policies that will result in the continued erosion of purchasing power.

Disclosures

Advisory Persons of Thrivent Advisor Network provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Cedar Cove Wealth Partners and Thrivent Advisor Network, LLC are not affiliated companies.

Securities offered through Thrivent Investment Management Inc. (“TIMI”), member FINRA and SIPC, and a subsidiary of Thrivent, the marketing name for Thrivent Financial for Lutherans. Thrivent.com/disclosures. TIMI and Cedar Cove Wealth Partners are not affiliated companies.‌

‌The material presented includes information and opinions provided by a party not related to Thrivent Advisor Network. It has been obtained from sources deemed reliable; but no independent verification has been made, nor is its accuracy or completeness guaranteed. The opinions expressed may not necessarily represent those of Thrivent Advisor Network or its affiliates. They are provided solely for information purposes and are not to be construed as solicitations or offers to buy or sell any products or services. They also do not include all fees or expenses that may be incurred by investing in specific products. Performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested and cannot invest directly in an index. Opinions expressed are subject to change as subsequent conditions vary. Thrivent Advisor Network and its affiliates accept no liability for loss or damage of any kind arising from the use of this information.

This communication may include forward looking statements. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could’” or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to differ materially.

Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.

The Alerian MLP Index is the leading gauge of energy infrastructure Master Limited Partnerships (MLPs). The capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities, is disseminated real-time on a price-return basis (AMZ) and on a total-return basis (AMZX).

The Bloomberg Commodity® Index (BCOM) is a broadly diversified commodity price index distributed by Bloomberg Index Services Limited.

The Bloomberg Global Aggregate® Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.

The Bloomberg Global Aggregate ex USD Index is a measure of investment grade debt from 24 local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. Bonds issued in USD are excluded.

The Bloomberg Municipal 1-10 The Bloomberg Municipal 1-10 Year Blend 1-12 Year Index Year Blend measures the performance of short and intermediate 1-12 Year Index components of the Municipal Bond Index — an unmanaged, market value-weighted index which covers the U.S. investment grade, tax-exempt bond market.

The Bloomberg U.S. Aggregate Bond® Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the U.S. bond market.

The Bloomberg U.S. Corporate High Yield Bond® Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The Institute for Supply Management (ISM) purchasing managers’ index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. It is considered to be a key indicator of the state of the U.S. economy.

The JPMorgan EMBI (Emerging Market Bond Index) Global Diversified Index is an unmanaged, market-capitalization weighted, total-return index tracking the traded market for U.S.-dollar-denominated Brady bonds, Eurobonds, traded loans, and local market debt instruments issued by sovereign and quasi-sovereign entities.

The LBMA (London Bullion Market Association) Gold Price, means that the price for a Pricing Date will be that day’s morning London Gold price per troy ounce of Gold for delivery in London through a member of the LBMA authorized to effect such delivery, stated in U.S. Dollars. The minimum acceptable fineness for LBMA gold is 995.0 parts per thousand fine gold.

The MSCI ACWI (Morgan Stanley Capital International All Country World Index) is a stock index designed to track broad global equity-market performance.

The MSCI EAFE® (Morgan Stanley Capital International Europe, Australasia, and the Far East) Index is a broad market index of stocks located within countries in Europe, Australasia, and the Middle East.

The MSCI (Morgan Stanley Capital International) Emerging Markets® Index is a selection of stocks that is designed to track the financial performance of key companies in fast-growing nations.

The MSCI (Morgan Stanley Capital International) US REIT Index is a free float-adjusted market capitalization weighted index that is comprised of equity Real Estate Investment Trusts (REITs). The index is based on the MSCI USA Investable Market Index (IMI), its parent index, which captures the large, mid and small cap segments of the USA market.

The Russell 2000® Index measures the performance of the 2,000 smaller companies that are included in the Russell 3000® Index, which itself is made up of nearly all U.S. stocks. The Russell 2000® is widely regarded as a bellwether of the U.S. economy because of its focus on smaller companies that focus on the U.S. market.

The S&P 500® Index, or the Standard & Poor’s 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.

The S&P (Standard & Poors) Global Ex-U.S. Property Index defines and measures the investable universe of publicly traded property companies domiciled in developed and emerging markets excluding the U.S. The companies included are engaged in real estate related activities such as property ownership, management, development, rental and investment.

The S&P/LSTA (Standard & Poors/Loan Syndications and Trading Association) Leveraged Loan Index tracks the performance of institutional leveraged loans, capturing data on loan prices, spreads and other critical metrics. The index is updated daily, providing timely insights into market movements and trends.

The West Texas Intermediate Index (WTI) is the main oil benchmark for North America as it is sourced from the United States, primarily from the Permian Basin. The oil comes mainly from Texas.

Definitions

The Bureau of Economic Analysis (BEA) is an agency of the Department of Commerce that produces economic accounts statistics that enable government and business decision-makers, researchers, and the American public to follow and understand the performance of the nation’s economy. To do this, BEA collects source data, conducts research and analysis, develops and implements estimation methodologies, and disseminates statistics to the public.

The Bureau of the Fiscal Service (BFS) is a United States Department of the Treasury agency that manages the federal government’s accounting, collections, payments, and public debt.

The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.

Basis points are typically expressed with the abbreviations bp, bps, or bips. A basis point is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%. In decimal form, one basis point appears as 0.0001 (0.01/100).

Capitalization (Cap) is used to describe the size of the company, by market capitalization as follows:

mega-cap: market value of $200 billion or more.
large cap: market value between $10 billion and $200 billion.
mid-cap: market value between $2 billion and $10 billion.
small cap: market value between $250 million and $2 billion.
micro-cap: market value of less than $250 million.

The CME FedWatch Tool is a tool created by the CME Group (Chicago Mercantile Exchange Group) to act as a barometer for the market’s expectation of potential changes to the fed funds target rate while assessing potential Fed movements around Federal Open Market Committee (FOMC) meetings.

The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve System that determines the direction of monetary policy. The FOMC has 12 voting members, including all seven members of the Board of Governors and a rotating group of five Reserve Bank presidents. The Chair of the Board of Governors also serves as Chair of the FOMC.

FRED (Federal Reserve Economic Data) is an online database consisting of hundreds of thousands of economic data time series from scores of national, international, public, and private sources.

Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.

Performance Disclosures

All market pricing and performance data from Bloomberg, unless otherwise cited. Asset class and sector performance are gross of fees unless otherwise indicated.

Asset Class Definitions

Asset class performance was measured using the following benchmarks: U.S. Large Cap Stocks: S&P 500 TR Index; U.S. Small & Micro Cap: Russell 2000 TR Index; Intl Dev Large Cap Stocks: MSCI EAFE GR Index; Emerging & Frontier Market Stocks: MSCI Emerging Markets GR Index; U.S. Interm-Term Muni Bonds: Bloomberg Barclays 1-10 (1-12 Yr) Muni Bond TR Index; U.S. Interm-Term Bonds: Bloomberg Barclays U.S. Aggregate Bond TR Index; U.S. High Yield Bonds: Bloomberg Barclays U.S. Corporate High Yield TR Index; U.S. Bank Loans: S&P/LSTA U.S. Leveraged Loan Index; Intl Developed Bonds: Bloomberg Barclays Global Aggregate ex-U.S. Index; Emerging & Frontier Market Bonds: JPMorgan EMBI Global Diversified TR Index; U.S. REITs: MSCI U.S. REIT GR Index, Ex U.S. Real Estate Securities: S&P Global Ex-U.S. Property TR Index; Commodity Futures: Bloomberg Commodity TR Index; Midstream Energy: Alerian MLP TR Index; Gold: LBMA Gold Price, U.S. 60/40: 60% S&P 500 TR Index; 40% Bloomberg Barclays U.S. Aggregate Bond TR Index; Global 60/40: 60% MSCI ACWI GR Index; 40% Bloomberg Barclays Global Aggregate Bond TR Index.

Red: November Market Commentary

Market Commentary

Red

Summary

Overview

Red

Markets

Looking Forward

Disclosures

Definitions

Performance Disclosures

Asset Class Definitions

Citations

Chase Abell

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