The Monthly Market Wrap provides an insightful analysis of treasury yields, fixed income performance, mega-cap stocks, and key economic indicators in October 2024. It also delves into housing market data and the performance of commodities.
Key Stock Market Index Performance
Equities slid in October as the 2024 presidential election drew near. The S&P 500 fell 0.9%, the Nasdaq Composite slipped 0.5%, and the Dow Jones Industrial Average lost 1.3% in October.
Semiconductor stock underperformance particularly weighed on markets; four of the ten worst performing S&P 500 stocks were companies in the semiconductors and semiconductor equipment industry, along with Super Micro Computer (SMCI).
Ex-US indices logged worse performances this month; Emerging Markets sank 4.3% and Developed Markets tumbled 5.4%.
Eight of eleven sectors finished last month in the black; this month, it was the opposite. Only three sectors – financials, communication services, and energy – had a positive October. The worst-performing sector was health care, which lost 4.6% in October. Close behind was consumer staples (-3.5%) and real estate (-3.3%), the latter of which was affected by slowing home sales and prices along with spiking mortgage rates.
Economic Data
The economy added just 12,000 jobs in October, the lowest monthly figure since December 2020. October saw several divergences among economic indicators: inflation fell while core inflation rose, the US ISM Manufacturing PMI declined as the Services PMI jumped higher, and mortgage rates spiked significantly even as Fed watchers expect the Fed Funds Rate to be cut by 25 basis points at the next FOMC meeting on November 7th, according to CME FedWatch.
Employment
The unemployment rate remained unchanged at 4.1% between September and October, while the labor force participation rate fell 0.1 percentage points to 62.6%. October nonfarm payroll data showed that the U.S. economy added just 12,000 jobs this month, partially due to the recent hurricanes and dockworker strike. This was the lowest monthly jobs figure since December 2020 and well below the expected increase of 100,000.
Inflation vs. Fed Funds Rate
The US inflation rate fell for the sixth straight month to 2.44% in September; on the other hand, core inflation went in the opposite direction for the second month in a row, coming in at 3.31%. The US Consumer Price Index rose 0.53% month over month, and US Personal Spending increased by 0.18%.
The Federal Reserve’s next FOMC meeting is just around the corner on November 7th, where the Fed is expected to cut its key Fed Funds Rate by 25 basis points, according to CME FedWatch. This would lower the Fed Funds Rate down to 4.50%-4.75% from 4.75%-5.00%, and mark the second rate cut since March 2020.
Housing Prices and Mortgage Rates
US New Single-Family Home Sales rebounded by 4.1% MoM in September following a contraction in August, but Existing Home Sales dipped by 1% MoM. The Median Sales Price of Existing Homes dipped for the third consecutive month to $404,500 as of September. This marks a 2.9% MoM decrease and a 5.2% decline from its all-time high set in June.
Related: Should You Pay Off Your Mortgage?
Mortgage rates surged higher in October, forming a V-shaped recovery since August. The 15-year Mortgage Rate rebounded by 83 basis points to 5.99% while the 30-year rose by 64 bps to 6.72%, both as of October 31st.
Gold and Bitcoin Strike Hits
Gold continued its 2024 run, adding another 4% in October, bringing its price per ounce in US Dollars to $2,734.20 as of October 31st, marking a YTD gain of 31.6%.
The price of Bitcoin topped $70,000 for the first time since June, reaching $72,342.62 as of October 31st and gaining 10.2% in the month. Bitcoin and other digital assets have seen price appreciation in the runup to the 2024 presidential election, with some – including hedge fund billionaire Paul Tudor Jones – describing them as a hedge against inflation and policy uncertainty. Bitcoin is up 71.3% this year, and though the price of Ethereum was largely flat in the month of October, it is 15.8% higher in 2024.
Fixed Income
Treasury yields shot higher in the middle and longer portion of the curve even as future Fed rate cuts are expected as early as the November 7th FOMC meeting. The 3-year and 5-year Treasury Note yields rose the most of any durations on the curve, gaining 54 and 57 basis points, respectively. Yields on the 1-month and 3-month Treasury Bills declined in October.
Several bond funds took a hit as a result of the increasing yields. The iShares 20+ Year Treasury Bond ETF (TLT) fell 5.5% in October, and the iShares iBoxx Investment Grade Corporate Bond ETF (LQD) lost 3.2%. Declines in the 1-month and 3-month T-Bill yields helped move the short-duration SPDR® Bloomberg 1-3 Month T-Bill ETF (BIL) higher by 0.4%.
Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.