- The U.S. Presidential election is over, and Donald Trump will return to office. The election went smoothly, and, in the end, was not all that close as President Trump scored a convincing victory in both the electoral college and the popular vote. We wrote last week that the worst outcome would be uncertainty, which did not occur, allowing markets to embrace the Trump trade right away: equities rallied massively, oil fell, Treasury yields were higher, and the dollar strengthened.
- Stocks surged past new all-time highs as investors cheered Donald Trump’s dominant election victory and his market-friendly policies. The S&P closed at 5,995 in what looks like a path to 6,000 any day now, the Dow is at nearly 44,000 and the Nasdaq is closing in on 20,000. All of the major equity indices are up by double-digits for the year-to-date, led by the Nasdaq.
- In individual names, the biggest immediate beneficiaries from Trump’s victory were Tesla (TSLA), crypto-related companies such as Robinhood (HOOD) and CoinBase (COIN) and financials. In earnings, the week’s top releases came from Palantir (PLTR), Astera Labs (ASTS), AppLovin (APP), Lyft (LYFT), Zillow (ZG), Fortinet (FTNT), Upstart (UPST) and Toast (TOST). The biggest misses were from Marqeta (MQ), Celsius (CELH), Match (MTCH), Coty (COTY), Hershey (HSY), Block (SQ), Unity (U), Pinterest (PINS), Monster Beverages (MNST) and Clover (CLOV). In corporate news, Nvidia (NVDA) passed Apple (APPL) as the world’s most valuable company while also gaining Dow Jones Index inclusion. Super Micro Computers (SMCI) continue to sell off after failing to provide a timeline for when company financials will be reported, and Carvana (CVNA) CEO continue to sell shares on the open market this time a 10m share sale for US$ 1.7Bi reducing his total ownership to now 69m shares.
- Meanwhile, we also had a Fed meeting, which was almost an afterthought. As expected, the Fed cut rates by -25 bps to 4.50%-4.75%. We also note the unequivocal response by Fed Chair Powell when asked if he would resign at the request of the President-elect: “No.” The Treasury curve shifted, with the front-end dipping on the Fed cut while yields in the belly and long-end were higher as concerns focused on the potential impacts from President-elect Trump’s fiscal and tariff policies.
The Week Ahead
- For the week ahead, we continue to get updates on October macro data, including CPI and PPI. CPI is expected to rise on a headline basis YoY to 2.6%, from 2.4% prior while core CPI hods steady at 3.3% YoY. On a MoM basis, both headline and core CPI are expected to be unchanged at 0.2% and 0.3%, respectively.
- PPI for October is also expected to show firmness in prices. On a MoM basis, PPI is estimated to rise by 0.2% headline and 0.3% excluding food and energy. On a YoY basis, it is forecast to climb by 2.3% and 3.0% respectively.
- This week, Home Depot (HD), InstaCart (CART), Cisco (CSCO), Disney (DIS), Applied Materials (AMAT), Ross Stores (ROST), Advanced Auto Parts (AAP) and Shift4Pay (FOUR) are among companies set to report third quarter earnings.
Market Summary – Returns and Yields
For additional insights, be sure to read our post-election investing primer.
Definitions, sources, and disclaimers
This content is being published by Amerant Investments, Inc (Amerant Investments), a dually registered broker-dealer and investment adviser registered with the Securities and Exchange Commission (SEC) and member of FINRA/SIPC. Registration does not imply a certain level of skill, endorsement, or approval. Amerant Investments is an affiliate of Amerant Bank.
Definitions:
- Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).
- GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
- The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earnings of workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
- Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
- 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. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
- The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a percentage of the labor force. Source: Bureau of Labor Statistics (BLS).
- The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work.Source: Bureau of Labor Statistics (BLS).
- Advance Monthly Sales for Retail and Food Services: Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
- Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
- The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
- The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).
Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO).
Financial Markets – Recent Prices and Yields, and Weekly, Monthly, and YTD (Table): Bloomberg, Weekly Market Data is in USD and refers to the following indices: Macro & Market Indicators: Volatility (VIX); Oil (WTI); Dollar Index (DXA); Inflation (CPI YoY); Fixed Income: All U.S. Bonds (Bloomberg Aggregate Index); Investment Grade Corporates (Bloomberg US Corporate Index); US High Yield (Bloomberg High Yield Index), Treasuries (ICE BofA Treasury Indices); Equities: U.S. Industrials (Dow Jones Industrial Average); U.S. Large Caps (S&P 500); U.S Tech Equities (Nasdaq Composite); European (MSCI Euope), Asia Pacific (MSCI AP), and Latin America Equities (MSCI LA); Sectors (S&P 500 GICS Sectors) Source: Bloomberg. Fed Funds Rate probabilities, Source: CME FedWatch Tool.
Important Disclosures:
The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from Amerant Investments, Inc. or any of its affiliates to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
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