Nicolet Wealth Management Monthly Newsletter – 11.5.24

Gold Rush

The price of gold advanced 4% in October, extending the metal’s 2024 gain to 32.3%. This is on top of the 12.8% increase gold experienced last year. Despite gold’s perception of being a risk safe haven, gold’s strong performance has come alongside a risk asset rally. There are a few reasons for gold’s strong year: global central bank demand, geopolitical concerns, Federal Reserve interest rate cuts, and a rising US debt burden. Since 2022, central banks have roughly tripled purchases of gold. Also, gold is thought to provide significant value as a portfolio hedge against tariffs and debt sustainability fears.

Improving Consumer Sentiment

The Conference Board’s Consumer Confidence Index, a survey that measures consumer attitudes, spending plans, and expectations, increased to the highest level since the start of the year. Consumer confidence advanced on expectations for the next six months to the highest level since December 2021 and consumers’ assessment of current conditions advanced the most since May 2021. Triggering the spike in confidence was consumers’ viewpoint on the labor market, which improved the most since June 2021. The share of consumers believing jobs were plentiful relative to those believing jobs were hard to get widened for the first time since this January.

Interest Rates Change Course

Across various bond maturities, interest rates exhibited a sharp turn higher. The 2-year Treasury yield rose nearly 0.53% to a level of 4.17% and the 10-year Treasury yield increased 0.50% to a level of 4.28%. The US Treasury bond index had its worst monthly performance (declining about -2.4% last month) since September 2022 amid signs of better economic data, Treasury debt supply outlook, the election and the Federal Reserve’s next policy decision. Recent bond auctions have come with tepid demand, as investors are requiring more yield compensation.

Consumers Boost Third-quarter Growth

U.S. economic growth advanced 2.8% in the third quarter of 2024, down slightly from the previous quarter’s pace of 3.0%. Consumers were once again the catalysts for economic growth, with consumer spending rising 3.7% from the prior quarter level of 2.8%. Wealthier households led spending on demand for goods and services. Residential investment declined -5.1%, as lower affordability from rising home prices and higher interest rates limited enthusiasm for new construction. Another positive contributor was the volatile business investment segment, which accelerated 11.1% on transport and information-processing equipment.

Stock Market Pendulum Swings Back to Big Tech

The growth segment of the stock market was able to eke out a modest outperformance relative to the value segment, despite the market participants’ disappointment in mega-tech third-quarter 2024 earnings announcements. Large companies represented by the S&P 500 index are beating earnings estimates at the lowest rate in nearly two years. However, the overall market growth is exhibiting earnings growth of 8%, which is in line with previous quarters. S&P 500 Growth index returned -0.64% and the S&P 500 Value index returned -1.27%. The overall stock market declined -0.92% on the month, halting a 5-month gain streak that would have been the longest since 2021.

Although we believe it to be reliable as of the publication date and have sought to take reasonable care in its preparation, all information provided is FOR INFORMATIONAL PURPOSES ONLY and we make no representations or warranties regarding its accuracy, reliability, or completeness and assume no duty to make any updates in the event of future changes. Past performance may not be indicative of future market results. Any examples used (including specific securities) are generic and meant for illustration purposes only and are not, and should not be interpreted as, offers to buy or sell such securities. To the extent indices are referenced, please note that you are not able to invest directly in an index.

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