What Happened Last Week
All-Time Highs: Both domestic large- and small-caps hit fresh all-time highs over the holiday-shortened trading week.
Rates Lower: Treasury yields fell last week, supporting the rally in U.S. equities.
Trump’s Tariff Talk: Investors only had a few days to process President-elect Trump’s tariff threats, which weighed on Europe and emerging market equities.
What We’re Watching This Week
Jobs Data: Economists expect a sharp rebound in November payrolls following October’s hurricane-and-strike skewed data; Tuesday’s JOLTS data will also add to the labor picture.
Economic Survey Data: Global PMIs from the U.S., Europe, Japan, and China to key investors on global growth outlook following the results of the U.S. election.
Tariff Policy: Trump’s initial threats were walked back quickly last week, but the risk remains.
Investment Management Team’s Views
- November ended positively for both stocks and bonds during a holiday-shortened week. The S&P 500 hit record highs above 6,000 last Friday, capping a 6% monthly gain. Small-caps also reached new peaks after their best month since December 2023. Optimism about the incoming administration’s economic and regulatory policies, including the market-friendly nominee, Scott Bessent, to head the Treasury Department, has yielded a repeat of the 2016 playbook for equities with financials and small-caps outperforming.
- Falling U.S. interest rates supported equities last week as well. The 10-year yield is now below pre-Election Day levels, defying expectations of a post-Red Sweep spike in benchmark rates. Bessent’s nomination contributed to the decline, as did tariff risks reminiscent of 2019’s trade wars. Global growth concerns, fueled by weak European data, have also pressured rates. On the near-term policy outlook, the Fed meeting in the middle of the month is priced slightly better than a coin flip for a 25 bp cut. We lean toward a cut and then pause but will take our cues from Friday’s jobs report.
- The most important macro event will be Friday’s jobs report. Economists expect a sharp rebound from last month’s massive miss owing to labor strikes and hurricanes. A handful of Fed speakers will hit the tape following the report, signaling to the market whether the data warrants another 25 bps cut or a pause in policy easing. Investors will also continue to digest last week’s tariff developments, like Trump’s surprise 100% tariff threat to the BRICS nations and the 25% tariff on all Mexican and Canadian goods. Throughout the week, we will also monitor global business sentiment surveys from the U.S., Europe, Japan, and China, to name a few key regions.
