Few were nonplussed by the outcome of the Federal Reserve’s meeting on November 7: a 0.25% cut in short-term interest rates.
The Fed has been consistently telegraphing a message that it believes there is room for further interest rate reductions.
The top of the target range for the Federal Funds rate, which influences how other short-term interest rates are set, is now 4.75%, down from a recent peak of 5.5%.
Somewhat surprising was how Americans voted in the November 5 presidential election.
Opinion polls had been forecasting a statistical dead heat, but the margin of victory in the popular vote was wider than expected: 1.6 percentage points, or about 2.5 million votes, in favor of Donald Trump.
More surprising was the gap in electoral votes (312 to 226), and that both houses of Congress will be under Republican control in January.
The biggest surprise for investors in November, though, was the extent to which the US stock market rallied.
The S&P 500 and the Dow Jones Industrial Average indices delivered their biggest monthly percentage gains of 2024 in November.
Stocks have pushed higher on expectations that proposed tax cuts and deregulation will further boost corporate profits.
And stocks have largely ignored the potential risks, such as higher inflation, that may weigh on the financial markets if pledges to impose tariffs on US trading partners come to pass.
For the month of November, US large company stocks gained 6% and US small company stocks did better still, registering an increase of 10.5%.
US investment-grade bonds returned 1.1%. Foreign stocks, where returns are measured in US dollars for US investors, struggled as the US dollar moved higher, and declined by 0.3%.
Year-to-date, US large company stocks have gained nearly 28%. US small company stocks are up by 23%. Foreign stocks have risen by about 6.5%, and US investment-grade bonds have returned 3%.
Here’s a snapshot of stock and bond performance for November:
US Small Co Stocks: CRSP US Small Cap Index; US Large Co Stocks = S&P 500 Index; US Bonds = Bloomberg US Aggregate Bond Index; Foreign Stocks = MSCI EAFE Index
-RK