Author: Kenzie

December 6, 2024

Black Friday concluded the final day of November trading, and the holiday-shortened session put an exclamation point on a
tremendous month for equities. Following a quick and conclusive election – which saw Republicans advance in almost all categories
– markets staged a relief rally to close the month at new all-time highs. The S&P500 rose 5.9% during November, posting its best
month of the year. In a change of trend, small-capitalization stocks also participated, with the Russell 2000 gaining 11% (!) to deliver
its best month in nearly a year. This stellar performance in the wake of November 5th should come as no surprise; the market tends
to rise post-election as uncertainty has been eliminated. As the chart below clearly shows, the more that time passes after the big
day, the smoother the ride becomes for stocks (and bonds).

Source: “Elections, The Fed, and Uncertainty: Navigating the Fixed Income Market”; Weitz Investment Management

Election results were clearly the primary driver of November performance, as the market quickly priced in expectations for further
tax cuts, additional fiscal support, and government deregulation. Presumably, all the above are positive for economic growth and by
extension, future market performance. On the tax front, it is all but assured that the 2017 Tax Cuts & Jobs Act will be extended.
Additionally, President Elect Trump has proposed even further corporate tax cuts (from 21% to 15%), which could maintain margins
and boost S&P500 earnings by 4-5%. While Trump’s cabinet selections have received mixed reviews, the market cheered on the
nomination of Scott Bessent to Secretary of the Treasury, noting the former hedge fund manager’s reasonable and pro-growth
stance. All told, the markets received an undeniable boost from the election and while the devil remains in the details, the initial and
ensuing reaction has been highly positive.

The other major development in November was the further normalization of monetary policy on the part of the Federal Reserve.
The central bank cut interest rates by a further 0.25% which brought the target to a range of 4.5-4.75%. Given the backdrop of
strong economic growth and a sturdy labor market, this was entirely expected and well-received by the market. Fed Chair Powell
indicated that the trends of a good economy, cooling inflation, and normalizing labor market looked poised to continue. Notably, he
also reiterated that the committee remains “data dependent,” and that future rate decisions would be made from meeting to
meeting. Accordingly, the yield on the 10-year Treasury fell from 4.39% to 4.19%.

Economic data came in mostly strong, delivering even more market optimism. Q3 GDP data was unchanged from its initial estimate
and showed growth clocking in at a 2.8% rate. Personal incomes and spending also ticked up marginally, reinforcing the notion that
the American consumer remains on solid footing. Inflation readings were slightly mixed, with both the CPI and PCE Index (the Fed’s
preferred measure) in line with expectations. Jobs data were also mixed but consistent with a strong, although slowing, labor market
(October data included one-time effects of hurricanes and a strike at Boeing). All told, there was nothing in the monthly data to
spook markets or knock them off their upward course. Good news for bulls.

Looking forward, the next key piece of data will be the November jobs report, which will give the Fed insight into labor market
trends. We also have the usual inflation metrics, which will be weighed heavily during the next Fed meeting, taking place December
17-18. Finally, market participants are already looking through to the next quarterly earnings season, where expectations are high.
Many analysts are expecting the strongest quarterly growth in three years. All these pieces will collectively determine the market’s
next move and will serve to set the stage for 2025 direction.

This will be our last writing of 2024. It has been a pleasure to share our thoughts and insights during a magnificent and truly stellar
year. As the sun sets on 2024, we wish all of you the happiest of holidays and continued prosperity during the new year. As ever, we
thank you for your ongoing trust and support.

Sincerely,
Jason D. Edinger
Chief Investment Officer
Boston Wealth Strategies

November 7, 2024

October ended with a downturn for the major indices, which were spooked by mixed corporate earnings, increasing bond yields, and the looming presidential election. The S&P500 gave back modest ground during the month, losing -0.92% during the period to close at 5,705. Small capitalization stocks fared even worse, losing -2.6% while correlating strongly with higher interest rates. As economic data continue to come in strong, rates have risen accordingly, and small caps have struggled. October concluded with sharp losses and pounded nails in the winning streak coffins: it was the first negative month since July for the NASDAQ and both the Dow and S&P500 had five-month positive streaks snapped. Boo-hoo.

Volatility increased markedly during October, as investors jockeyed to position portfolios ahead of the presidential election. Rates and bond markets showed the highest relative volatility, as yields have surged on the back of inflationary campaign rhetoric and decreased expectations for future rate cuts. During the month, yields across the curve backed up around 0.5% depending on the precise maturity. This put pressure on bond prices and resulted in losses across all the major bond indices. During the 1.5 months since the Fed began the easing cycle, economic data have continued to come in strong and cast doubts over how many cuts that the market has priced in. Stuck between a rock and a hard place, Chair Powell has his work cut out for him if he is to deliver on both amount and size of market expectations.

Powerful headwinds to lower future interest rates have come in the form of ongoing economic strength, minor but sticky inflation, and a sustained low unemployment rate. None of the October data contradicted these points:

• October payrolls were weak (+12K jobs created) but resulted in no change to the unemployment rate
• September inflation came in slightly hotter than anticipated (0.2% monthly versus 0.1% expected)
• Headline GDP came in slightly weaker (2.8%) but personal consumption, which accounts for 2/3 of the economy, came in at a strong +3.7%

In keeping with the above, the Federal Open Market Committee is widely expected to reduce its target Federal Funds Rate when it meets November 7^th, most likely by 0.25%. Nevertheless, investors have clearly recalibrated their thinking relative to how aggressive the central bank will be in cutting rates over the next cycle. Accordingly, we expect volatility to remain elevated in the near term.

Gold and other precious metals continue to grab headlines as their blistering rallies continue. Physical gold rose +4.2% during the month and hit multiple all-time highs after storming nearly 6% higher in September. While we have seen furious demand on the part of global governments and central banks, recently we have seen a safe-haven trend emerge ahead of the election, which still appears too close to call. Gold is up an incredible 33% this year, arguably sparking even more demand and resulting in an upward, virtuous cycle. Moving forward, potential tailwinds for gold and metals include global monetary easing, sticky inflation, increased fiscal imbalances (deficits), associated dollar debasement, and geopolitical conflict. Not to mention the ever-present FOMO!

As of this writing, we are less than 24 hours until Election Day. Naturally, there is a lot of political noise dominating the landscape. While we would not be surprised to see heightened volatility in the immediate aftermath of the election,  we do recognize that markets tend to look through elections to quickly and efficiently price in any major policy implications. And the further we travel away from the big day, the smoother the ride tends to be for both stocks and bonds. We rest assured knowing that time is the great equalizer.

Outside of the election, the economic data continue to point to a soft landing with no recession. The Fed is telegraphing that it intends to continue its loosening policy, outside of major dislocations in terms of employment and/or inflation. It is widely expected that the bank will cut interest rates a further 0.25% while awaiting crucial economic data before the final December meeting. From a seasonal perspective, November has been the best month for stocks over the last decade and has posted an average return of 3.81%. Not shabby. Either way, November 2024 will likely be an epic month in many regards, and we stand watchful with our investment processes firmly in place.

We wish you a very early Happy Thanksgiving and as ever, we thank you for your ongoing trust and support.

Sincerely,

Jason D. Edinger

Chief Investment Officer

Boston Wealth Strategies