Market Recap – Week Ending Nov. 1

Stocks Lower; Fed Meeting This Week

Overview: Stocks were lower across the globe for the second consecutive week last week as soft labor market data in the U.S. led stocks lower. For the week, the S&P 500 index was down 1.4%, with international markets following suit as developed (MSCI EAFE) fell 1.0% and emerging markets (MSCI EM) were lower by 1.1%. In the U.S., nonfarm payrolls for October increased just 12,000, the slowest monthly pace of increase since 2020, while the unemployment rate held steady at 4.1%. On the inflation front, headline personal consumption expenditures (PCE Price Index) rose 2.1% annualized, in line with expectations and down from 2.3% in the prior month. Meanwhile, the first report of third quarter GDP came in at 2.8%, below expectations of 3.0%, but showing better-than-expected consumption and fixed investment as the economy continues to demonstrate resilience. In bonds, yields rose with the 2-Year and 10-Year Treasury notes closing the week at yields 4.20% and 4.36%, respectively. Looking ahead to this week, Tuesday’s presidential election results will be in focus, and after the election, the Federal Reserve will hold its penultimate policy meeting for the year on Wednesday and Thursday, where markets are in near consensus for a 25-basis-point rate cut at the conclusion of the meeting, with another 25-basis-point cut expected at the final Fed meeting in December. Investor focus will be on commentary from Federal Reserve Chair Jerome Powell after the meeting, as markets look for insight into timing and magnitude of further rate cuts as well as direction on the status of the further unwinding of the balance sheet.

Update on Gold (from JP Morgan): 2024 has been a banner year for gold. Now worth $2,736 per troy ounce, the precious metal has climbed more than 30%, on pace for its best year since 1979, and set 41 all-time highs. Since gold doesn’t produce income, its price is typically inversely correlated to real interest rates. However, this year’s rally has come despite a ~32bp increase in 10-year real rates, suggesting other factors are driving prices higher. According to the World Gold Council, gold demand in 2024 climbed to a record 3,761.9 tonnes (t) through the third quarter, largely driven by strong interest from investors and central banks. With geopolitical tensions, fiscal concerns and, more recently, election-related uncertainty elevated, investors have flocked to gold as a “safe-haven” asset. In fact, 3Q24 marked the first quarter since 1Q22 in which gold ETFs saw net inflows. Moreover, after the U.S. sanctioned Russian assets in early 2022, global central banks, particularly in emerging markets, accelerated gold purchases to diversify reserves from U.S. dollars. Quarterly net purchases from banks have averaged 257t since 2022 compared to 118t from 2010 to 2021. While higher prices have weighed on central bank buying in recent quarters, net purchases remained elevated during 3Q24 at 186t. Later this week, U.S. election jitters should fade as investors gain clarity on who will take office, alleviating some upward pressure on gold prices. That said, geopolitical tensions and fiscal concerns likely aren’t going away anytime soon, and with monetary easing likely to increase gold’s relative value, having modest gold exposure to diversify could make sense. However, long-term investors should remember there is more that glitters than just gold. By providing greater capital appreciation with less volatility, opportunities across stocks, bonds and other alternatives can help better support strategic investment goals.