November 2024
Market Update

Monthly Market Summary

• The S&P 500 Index returned -0.9%, outperforming the Russell 2000 Index’s -1.4% return. Three of the eleven S&P 500 sectors traded higher, with Financials and Communication Services both gaining more than +1.5%. The remaining eight sectors all traded lower by more than -1% during the month.

• Corporate investment-grade bonds produced a -3.2% total return as Treasury yields rose, underperforming corporate high-yield’s -1.0% total return.

• International stocks traded lower. The MSCI EAFE developed market stock index returned -5.3%, while the MSCI Emerging Market Index returned -3.1%.

Summary of Market Returns

Stocks End 5-Month Winning Streak with First Loss Since April

Stocks finished October lower as investors navigated Q3 earnings, the election, and uncertain Federal Reserve policy. The S&P 500 posted its first monthly loss since April, lowering its year-to-date return to +20.7%. Large-cap stocks slightly outperformed small-cap stocks, but most investment factors produced similar returns. In the bond market, Treasury yields climbed as investors considered the possibility that the Fed may not cut interest rates as much as previously expected. Concerns about fiscal spending also drove Treasury yields higher, with expectations for continued high government spending regardless of the election outcome. With yields rising sharply, bonds traded lower for the first time in six months.

Treasury Yields Spike After the Fed’s September Rate Cut

The bond market has experienced several large swings this year. The 10-year Treasury yield began the year around 3.90%. However, as inflation rose early in the year, the 10-year yield climbed to 4.70% by late April.

Yields then reversed over the summer as falling inflation and rising unemployment fueled expectations for deeper rate cuts. Between late April and mid-September, the 10-year yield dropped by over -1.00%. It hit a low of 3.62% the week of the Fed’s September meeting, when the central bank cut interest rates by -0.50%. It may seem counterintuitive, but since the Fed’s September meeting, Treasury yields have risen sharply. The 10-year Treasury yield ended October at 4.28%, rising by over +0.65% in one and a half months.

What's behind this year's bond market swings? Volatile economic trends and uncertain Fed policy. Two key data points have increased volatility: inflation surged early in the year before easing over the summer, while unemployment rose from 3.7% in January to 4.3% in July, then fell to 4.1% in September. The Fed aims for stable prices and full employment, but conflicting data has complicated its interest rate decisions. There's general agreement that the Fed should continue to lower interest rates, but there's debate about how quickly and how much. The recent increase in Treasury yields reflects expectations for fewer interest rate cuts. However, in the first week of November, the Fed trimmed interest rates by a quarter point, bringing the target rate range to 4.5% -4.75%. The Fed will meet one more time this year in December. At this time, Fed Chair Jerome Powell has declined to say what the Fed might do in December. As he has reminded us many times, the Fed will just have to see where the data leads them.

Current Positioning

Our models continue to favor U.S. large-cap stocks; however, we have observed strength in various other asset classes that are worth monitoring. In our rotation strategy, although we continue to favor large-cap stocks, we added exposure to Gold last year and Real Estate in August. We will continue to track these trends to navigate the evolving landscape and make informed investment decisions.

Turning our attention to the bond markets, our Total Return Bond Strategy remains fully invested. While we still favor bank loans for their lower volatility and smoother trend, we anticipate yields will decrease as the Fed continues to lower rates. We will monitor developments across all asset classes and make changes as deemed appropriate.

If you are concerned about your risk level, please reach out to us to schedule a time to review your allocation and financial plan.

Upcoming Events

Q4 2024 Economic and Market Update
Date: Wednesday, November 13th at 12pm Mountain Time

Copperwynd Financial is hosting a virtual discussion for our clients to provide insight into the current economic environment and investment trends. The discussion should last 30 minutes with time remaining for additional questions and answers. Please register here.

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.