Markets rebounded sharply following a bumpy month of October, with the presidential election now in the rearview mirror. Volatility dipped to its lowest level since mid-July as the uncertainty surrounding the event dissipated. As investors turned attention back to the Fed, economic data seemed to support one more rate cut in 2024, further supporting sentiment.
Small-cap stocks lead the way higher, with the CRSP US Small Cap Index soaring 10.50% for the month. Larger indices followed the momentum higher, with the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 posting gains of 7.74%, 5.87%, and 5.31% respectively. Growth slightly outperformed value as a style, while all major sectors ended the month in positive territory.
Markets overseas didn’t bode quite as well as the US. Developed international stocks finished with a slight gain of 0.40%, while emerging markets fell 2.15%. Concerns about US trade policy, combined with ongoing economic weakness, created more of a headwind for stocks abroad. Despite the recent stimulus measures over the past few months, China has continued to face sluggish growth in its attempt to spur more activity.
Shortly after the presidential election concluded, the Fed announced its second rate cut of the cycle, dropping the target interest rate by another 25 basis points. While rates remained somewhat volatile throughout the month, the 10-year Treasury yield eventually settled lower falling from 4.28% to 4.18%, leading to a 1.06% gain for aggregate US bonds. This marked the sixth time in the past seven months in which bonds have experienced an increase.
While the positive response in markets seems clear with the benefit of hindsight, there was a general sense of anxiety leading up to the election. Many people felt this time was different than any other in the past, and not without reason. However, this highlights exactly why having a plan and investment strategy in place is so important. It can be easy to let our gut feelings and emotions drive our decisions when things don’t feel normal. Having predetermined rules in place can help cut through any near-term uncertainties, allowing us to focus on our longer-term goals.
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