December 2024
Market Update

Monthly Market Summary

• The S&P 500 Index returned +6.0% but underperformed the Russell 2000 Index’s +11.1% return. All eleven S&P 500 sectors traded higher, with Consumer Discretionary and Financials gaining more than +10%. In contrast, defensive sectors, such as Health Care, Utilities, and Consumer Staples, underperformed the S&P 500.

• Corporate investment-grade bonds produced a +1.8% total return as Treasury yields declined, marginally outperforming corporate high-yield’s +1.6% total return.

• International stocks traded lower for a second consecutive month. The MSCI EAFE developed market stock index returned -0.3%, while the MSCI Emerging Market Index returned -2.7%.

Summary of Market Returns

Source: YCharts, 10/31/2024 – 11/30/2024, Total Return Data using SPY, DIA, IJH, IWM, QQQ, EFA, VWO, AGG, and JNK. 2024 returns as of 12/31/2023.

Markets Set New All-Time Highs in November’s Post-Election Rally

The U.S. presidential election results fueled November’s stock market rally, as investors focused on the incoming administration’s policy agenda and its implications. The S&P 500 gained +6.0%, its biggest monthly return since November 2023. The index traded above the key 6,000 level and set a new all-time high, bringing its year-to-date return to +27%. Smaller companies took center stage during the broad market rally, with the Russell 2000 surging +11.1% to set a record high. In the bond market, Treasury yields rose after the election due to concerns about increased fiscal spending, tax cuts, and large fiscal deficits under the next administration. However, later in the month, yields reversed lower, and bonds posted positive returns. With Republicans taking control of the White House, Senate, and House in January, the following section discusses key policy areas to watch, along with the potential market and economic impacts.

Key Policies to Watch in the Next Administration

Investors are monitoring two key areas: tax policy and trade. The administration is expected to focus on extending the tax cuts passed during President Trump’s first term. This could stimulate economic growth and boost corporate profits, although it could widen the fiscal deficit. On trade, the administration plans to use tariffs to advance U.S. interests in international affairs and renegotiate trade deals. However, in the near term, tariffs could disrupt supply chains, slow economic growth, and squeeze profit margins.

Other critical policies include immigration and deregulation. There are concerns that tariffs, stricter immigration policies, and expansionary fiscal policy could combine to keep inflation high. If so, the Federal Reserve might need to keep interest rates higher for longer. Elsewhere, there is an expectation that deregulation could create new growth opportunities in the financial and energy sectors, while relaxed antitrust enforcement could lead to more mergers and acquisitions. Economic growth and corporate earnings will remain important long-term drivers, but in the short term, markets may be sensitive to shifting policy headlines as the new administration takes office.

Current Positioning

For most of this year, U.S. Large Cap stocks have been a key focus due to their relative strength. Recently, however, our models have shifted to include U.S. Small Cap, which has gained significant momentum. While Small Cap stocks are historically more volatile, we’ll monitor this trend and adjust as needed if conditions shift.

In the bond market, our Total Return Bond Strategy remains fully invested, with bank loans favored for their stability, attractive yields, and lower interest rate risk. While this approach involves certain tradeoffs, we are actively monitoring other bond asset classes and will adapt strategies as market conditions evolve.

As we prepare for the end of the year, we want to wish you and your family a wonderful holiday season. We appreciate the trust and confidence you’ve placed in Copperwynd Financial and we look forward to working with you in the new year!

If you have any questions, please do not hesitate to contact our office at 480-348-2100.

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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 500 is a float-weighted index, meaning company market capitalizations are adjusted by the number of shares available for public trading. Note: Investors cannot invest directly in an index. These unmanaged indices do not reflect management fees and transaction costs that are associated with most investments.