October 2024 was a month of notable volatility in the stock market, characterized by a decline in most areas of the global stock market after a prolonged period of gains. In the U.S., the S&P 500 ended the month down approximately 1%, breaking a five-month streak of positive performance. The weakness was most evident outside the U.S., partly amplified by the strong dollar. Foreign markets experienced losses of 5.4%, while emerging markets saw a decline of 4.3%.
The downturn in October was also influenced by rising government bond yields, which surged as the market adjusted to the Federal Reserve’s recent monetary policy shifts. The Fed had cut short term interest rates by 50 basis points in September, aiming to support economic growth amid signs of moderating inflation. However, the subsequent rise in yields indicated investor concerns about future inflation and economic stability.
Economic Data Update
Economic indicators released in October painted a mixed picture. While the unemployment rate remained low, the U.S. economy added only 12,000 jobs in October, significantly below expectations. Many economists attributed this disruption to effects from the recent hurricanes. This slowdown in job growth may raise concerns about the labor market’s strength if it persists again next month.
Consumer spending remained robust, as the Real GDP growth estimate for the third quarter came in at 2.8%, a slight decline from the previous year. Inflation continued to moderate as the Fed’s key inflation indicator, the PCE deflator, slowed to an annualized rate of 2.2%, slightly above target levels.
Recent Presidential Election Update
The recent presidential election, held on November 5th, saw Donald Trump defeat Kamala Harris, securing a second term in office. This outcome has potential significant implications for the markets. Trump’s victory is expected to lead to a shift in fiscal policies, particularly regarding government spending and taxation, which could influence investor sentiment.
Markets frequently respond to political shifts, and Trump’s return could introduce greater volatility as investors evaluate potential policy changes. However, the market reaction so far has been quite positive, with several indices hitting new all-time highs in early November.
Market Outlook
Looking ahead, the market may continue to experience volatility as investors digest the implications of the Fed’s policies and the evolving economic landscape, particularly in light of the recent election results.
In summary, October 2024 was characterized by a retreat in stock market indices amid rising bond yields and mixed economic signals. The recent presidential election adds another layer of complexity, with potential shifts in policy that could impact market dynamics.
