Volatility returned last week due to trade tensions and a sudden geopolitical shock, even though economic data showed moderating growth and lower inflation.
Investors digested a fragile U.S.–China trade truce, a steady but slowing labor market, and an escalation in the Israel–Iran conflict that sent safe-haven assets soaring. In this commentary, we break down the key developments, from Washington to the Middle East, and discuss what they mean for markets, interest rates, and long-term investors.
Market Commentary 11/12/24
Market Recap:
Stocks moved higher this past week, with most gains occurring in the post-election period. The S&P 500 hit a new record, approaching the significant 6,000 level, as investors priced in expectations for the incoming administration’s pro-growth, reflationary policies. Small caps led the advance, followed closely by growth and high-beta stocks.
Sectors tied to U.S. economic expansion and deregulation, including Financials, Industrials, and Energy, saw notable gains, whereas defensive sectors lagged. Utilities and Staples posted losses, while Real Estate and Health Care made only modest gains.
Bond markets showed mixed performance; corporate bonds climbed as credit spreads narrowed, while Treasury bonds declined due to rising yields. International stocks underperformed as the strengthening U.S. dollar weighed on overseas assets.
As anticipated, implied volatility measures dropped significantly, with the VIX hitting a nearly three-month low and the MOVE Index showing a steep reduction in expected yield volatility. Oil prices also rose following OPEC’s decision to extend production cuts.
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Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
S&P 500 Index: The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the Index proportionate to its market value.
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Volatility returned last week due to trade tensions and a sudden geopolitical shock, even though economic data showed moderating growth and lower inflation.
Investors digested a fragile U.S.–China trade truce, a steady but slowing labor market, and an escalation in the Israel–Iran conflict that sent safe-haven assets soaring. In this commentary, we break down the key developments, from Washington to the Middle East, and discuss what they mean for markets, interest rates, and long-term investors.