November 3, 2024
Weekly Market Outlook
By Donn Goodman
Welcome back, readers. Hopefully, you had a good week (perhaps participating in Halloween festivities) and were able to “tune out” the election noise that seems to resonate every minute of the day on social media or on television shows.
I watch a fair amount of sports-NFL and NBA games, and I have noticed that every commercial is full of local and national political ads. Couple this with an onslaught of earnings announcements, especially the Mag 7 announcements this past week (Microsoft, Apple, Amazon, to name a few), and you had the potential for positive and negative surprises in the stock market this past week.
Stocks finished the week lower following a few very volatile sessions. There was a mixed bag of corporate earnings as Microsoft and Apple’s forecasts were a bit light on future expectations. Meta hinted at much higher AI spending and Amazon beat the street by a healthy margin. Other stocks also provided a mixed bag that rattled investor confidence right before the “trick or treat” began in earnest on Thursday (the last day of October). See the illustration below:
What we continue to witness from retail and financial stocks (American Express) is that consumers continue to spend. One would have to believe that wage gains along with good stock market returns these past two years have helped smaller investors believe they are in better financial shape than some of the credit card companies and their high credit card/debt balances would have you think.
As we prepare for the upcoming election results this week and an upcoming Fed meeting, we were met with a big surprise in the financial markets on Friday as non-farm payrolls missed expectations by a wide margin. Earlier in the week, inflation numbers indicated that we continued to trend downward, but month-over-month numbers have remained elevated. These two data points prompted every analyst to start speaking on whether the Fed will lower rates at their next meeting. Last month this was a given. The consensus by week’s end was they would still cut by 25 basis points at their next meeting.
Election season.
The market this week followed the historical 4-year election blueprint. Enhanced volatility is a typical byproduct of election season anxiety. Mixed with negative economic growth numbers, especially from a lack of job creation, you have a nervous market. On Thursday, this set of factors “spooked” the markets, and technology stocks sold off over 2% on Halloween.
Historically, the markets ALWAYS seem to see elevated volatility ahead of National elections. In 2020 the S&P experienced a sharp 7% decline in late October, as then (and now) uncertainty loomed over how the upcoming administration might affect energy policy, taxes and healthcare.
Leading up to this year’s election, we see a similar pattern. We also have new geopolitical risks coming from Russia, the Middle East and ongoing extreme vitriol and divisiveness in our own country. Expect increased volatility until the dust clears and we have these critical decisions behind us.
Still going strong.
The last couple of weeks we have been writing about just how good the 2024 stock market has been, so far. We want to reiterate that the returns already this year are well above average and continue to keep investor sentiment high as well as attract new retail investors into the markets. If you have not read the past two week’s Market Outlooks showing just how good the markets have been this year, you can go here to read or review what we have written.
The financial markets don’t like uncertainty. However, the technology stock plunge (on Thursday) was not so extreme as the NASDAQ scored a new all-time high earlier in the week before pulling back in the second half of the week. See charts below:
Election outcome.
I have been asked quite a few times lately what I think of the election and who I think becomes our next President. Like you, I follow much of the noise coming from both sides and see the polls, which describe this as a “toss-up” race.
Different industries and sectors of the economy will directly benefit from a Harris or Trump victory.
If Harris wins: Her policies would likely prioritize clean energy, healthcare and technology. Companies dealing with green infrastructure, electric vehicles and renewable energy would benefit. However, her administration would likely continue to be a high regulatory environment, which could force pressure on large companies, including the mega-cap technology firms. Gold and other commodities could benefit from increasing government spending and inflationary pressures.
If Trump wins: In a second Trump term, we will likely see a pro-business agenda with further tax cuts and likely deregulation of government policies. Sectors such as industrials, energy and financials would likely be the beneficiaries. Defense stocks and traditional manufacturing industries would likely benefit from additional government spending in these areas. Bitcoin would be a bigger beneficiary under the Trump administration so also watch for that to potentially accelerate.
What if?
I have also been asked a few times, “What if the Republicans sweep the Presidency, the Senate, and the House?” Not knowing what might occur, I have consistently said that I think government works best with checks and balances, which we often call “gridlock”. The following chart does a much better job of showing the election cycles and what happens with stock market performance operating within a sweep or gridlock under different administrations:
More on the upcoming Election.
I am very aware that most investors want to know how this upcoming Election turns out. We could spend a whole Outlook addressing many of the prognostications and the ultimate victor’s impact on the economy.
Our friend, Jeffrey W. Huge (a CMT-Chartered Market Technician), is a very good and thorough writer and market analyst. On Saturday (yesterday) he put out his HUGE INSIGHTS: The Big Picture #39 issue (a substack paid issue) that he is offering for free this weekend. You might enjoy checking out his monthly publication. He does an excellent job of providing different polls and angles on the upcoming election. You can obtain his latest offering here: https://hugeinsights.substack.com/ A snapshot of the Big Picture and the election section follows:
Win streaks.
Two weeks ago, we reported to our readers that we were on a positive 6-week win streak in the S&P 500. We told you then that the odds for a 7th positive winning week were slim. This was because the S&P hardly ever scores a 7-week positive streak.
We now know that the S&P 500 did not make it to a 7th consecutive weekly positive return. But historically, what happens after this win streak subsides, and what might we see over the next month? We provide the following chart to illustrate what might come next.
Caution advised.
Not only have we entered a period of uncertainty due to the elections and a perceived economic slowdown (and rising interest rates from elevated inflation), but the markets have indicated they may be ready to take a pause here. This would be a healthy and long overdue potential pullback. As we have reminded you many times, markets do not go straight up and the market of 2024 has defied many a Wall Street prognostication. Some of our own indicators are suggesting that caution is well advised (especially if we have a contested election or problems at the polls).
One of the simple ways to see the overall health of the markets is to use the color charts from the Big View section of our website. As an example, we provide Friday’s color charts for the number of S&P 500 and NASDAQ 100 stocks above their 50-day moving average. As the chart indicates we have gone into a short-term contraction. As the color chart indicates below, caution is advised. See below:
An additional illustration and comment below from another very good market technician.
Welcome to November.
Get ready for the best 3-6 months of the year. Once the dust settles from the upcoming election and we see some clarity about which of the two candidate’s policies will steer the economy going forward, we will get the Post Election lift off, according to many analysts we follow including Jeff Hirsch from Stock Traders’ Almanac. See the following charts which should provide some modicum of optimism for investors going into the end of 2024:
Seasonality. "The best six months of the year are right around the corner."
And what areas of the market are typically the best to invest in for the month of November? (the chart below uses a t-stat which is a statistical way of calculating the averages going forward. if you would like to understand it more precisely go to the following link https://www.investopedia.com/terms/t/t-test.asp) See chart below:
The Gold and Silver markets.
If you have been following us closely this year we have been suggesting, urging and pointing out that the metals markets are attractive as they hit one new all-time high after another one (in Gold). Also, over the last two years Mish has been sharing her prognostications for the metals and commodities markets on most of her National TV appearances. Just as a follow-up to the past few weeks’ commentary, the metals and mining markets have taken a breather with Silver doing a retest of its recent breakout.
There are varied reasons that add ammunition to this pause including higher interest rates, a stronger dollar and of course, the uncertainty about the outcome of the election. We provide the following two charts to illustrate that the Gold market remains healthy and the Silver market is at a precarious point.
Thank you for reading today’s Market Outlook. Make sure you review the Big View bullets below and the accompanying video that was produced by Geoff today as Keith is traveling and away.
We appreciate your ongoing interest in our risk-managed approach and remind you that if you would like additional information on the MarketGauge trading models, reach out to [email protected].
If you are interested in opening a managed account following the MarketGauge models and several proprietary All-Weather portfolio blends (including a multi-manger fixed income approach that has superior performance results beating over 90% of mutual funds, ETFs and money managers) and other market beating equity strategies not offered as subscription models, please contact [email protected].
Have a safe, enjoyable and profitable week. Get your popcorn ready for Tuesday evening’s election results. God Bless America!!!
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 Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts.
The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral. The video analysis dives deeper. |
The bullets and video were prepared by Geoff Bysshe this week
Risk On
Risk Off
Neutral
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