By Rick Schwerd | November 15, 2024
Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for our next update on December 6.
Disappointing Inflation Data
This week’s inflation data was on the disappointing side. The Consumer Price Index (CPI) increased to 2.6 percent from 2.4 percent last month. Core-CPI, which removes volatile food and energy prices, remained at 3.3 percent and has made essentially no downward progress since May. The Producer Price Index was also underwhelming with a half-percent increase to 2.4 percent.
Overall, the data is not horrible. We are much better off than we were a couple of years ago when CPI reached 9.1 percent. However, concern with inflation reigniting will remain a story and impact markets and policy for the foreseeable future. The inflation data and stronger economic growth have pushed the benchmark 10-Year U.S. Treasury from 3.73 percent at the end of September to 4.44 percent today. The 10-Year Treasury is the biggest determining factor in mortgage rates, which have also risen significantly over the past month-and-a-half.
The Federal Reserve did cut rates a quarter-percent point last week, but future rate cuts are becoming less of a certainty. Right now, markets are still predicting a 0.25 percent cut in December, but the outlook for next year has become much cloudier.
Republicans Retain the House
With election returns tallied, the Republicans have officially reached the necessary 218 seats in the House of Representatives to retain their slight majority. On Wednesday, Mike Johnson (R-La.) was re-elected unanimously as Speaker of the House. In the Senate, where the Republicans will hold a 53-47 majority, Sen. John Thune (R-S.D.) was elected Majority Leader.
One of the first items on Congress’ agenda is tax policy, an important determinate for investors. Certain provisions from the 2017 tax bill begin to sunset in 2025. Republicans have an aggressive plan given their control of all three branches. However, they will be hampered by high deficits the Federal Government has been running since the start of the pandemic. Federal debt to GDP is running at about 120 percent since the pandemic. It was approximately 105 percent prior to the pandemic. Twenty years ago, the percentage of debt to GDP was approximately half what it is now. Interest payments are now a bigger budgetary line-item than national defense.
Markets Take a Breather
Equity markets are giving back a bit of the strong gains from last week. The S&P is down about a percentage point since Monday, following a 5 percent gain in the wake of the election last week. The disappointing inflation data and higher Treasury yields are weighing on markets.
As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out to us at (518) 415-4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a Senior Investment Officer at Glens Falls National Bank. He oversees individual and corporate retirement plans, personal trusts, investment management accounts, foundations and not-for-profit relationships. He is also co-portfolio manager of the proprietary North Country Large Cap Equity Fund.