Market Commentary

November 8, 2024

Following robust year-to-date equity returns, especially for Big Tech-dominated benchmarks, the stock market largely traded sideways in October ahead of the highly consequential U.S. elections.  A striking reversal in betting odds favoring a Republican sweep led to the strong outperformance of GOP policy beneficiaries.  However, speaking more broadly, only three (financials, telecom services, and energy) of the S&P 500 Index’s eleven GICS sectors generated a positive return for the month.  In contrast to stocks, U.S. Treasuries retreated as the yield curve shifted higher against the increasing probability of inflationary policies and more profound fiscal deficits under another Trump administration.  Combined with the currently strong underlying economic momentum, fed funds futures are also discounting fewer interest rate cuts through 2025.

Regarding portfolio construction, we are increasing our weighting in banks due to attractive valuations, benign credit conditions, improved net interest margins, and a better regulatory outlook.  Conversely, we have taken a more cautious view of insurers as the robust pricing environment appears to have run out of steam, with loss costs remaining elevated due to lingering inflation pressures.  We also continue to add to select positions within technology during pullbacks.  There is no discernible slowing in AI-related spending, and a cyclical pick-up in many areas within IT will likely occur in the months ahead.  Overall, rather than making dramatic changes to sector weightings, we are instead focused on “bottom-up” stock picking, emphasizing companies with high earnings visibility and strong balance sheets.

For our latest full Global Investment Outlook & Strategy Update, download the .pdf document.