The 2023 recession calls were unfounded. The economy has been remarkably strong and there aren’t strong recession signs.
The S&P 500 Index, the broad measure of US stocks, has hit 57 new highs in 2024, as of mid-November.1
Many income-generating investments, such as Treasuries and muni and corporate bonds, are currently yielding 4% or more.2
It’s the time of year to reflect on what we’re thankful for. Let’s turn down the volume of our fear-inducing 24-hour news cycle and instead focus on some good news. Here’s my list of 10 things that investors can be thankful for this year.
The 2023 recession calls were unfounded. Rather, the economy has been remarkably strong. The usual trappings of a recession, including significant corporate leverage3 and/or excess business4 or housing inventory,5 don’t appear evident.
The S&P 500 Index has hit 57 new highs in 2024, as of mid-November.1 Valuations on the broad index are elevated, but much of that’s concentrated in the top names.6 For context, the price-to-earnings ratio of the S&P 500 Equal Weight Index is in line with its historical average.7
Inflation has cooled,8 but wages have continued to climb,9 with the greatest gains in lower-income households.10 Wages have been outpacing inflation for more than two years now.11
Wages are up.11 The stock market is near an all-time high.12 Home prices are up more than 50% since the eve of the pandemic.12 It’s no surprise then that US household net worth is at an all-time high of $154 trillion.13
The easing cycle has commenced. The adage tells investors, “Don’t fight the Fed.”
Wars are waging in two oil-producing regions of the world, and yet oil and gasoline prices remain relatively low.14 That’s because the US is currently producing roughly 13.5 million barrels of oil per day.15
S&P 500 Index corporate earnings have doubled since the pandemic-driven low of 2020.16 The US remains a driver of the world’s innovations and advancements.
Investors used to dream of generating 4% in their income investments. Currently, 4% yields or are available across many income-generating assets, including US Treasuries, US corporate bonds, and US municipal bonds.2
The US election has passed without significant incident. The much-anticipated period of uncertainty and/or unrest following the election didn't occur. A peaceful transfer of power will commence in January 2025.
Now is indeed one of the best times to be alive. Advances in medicine, vaccines, and health care have significantly improved our quality of life. We have unprecedented access to information, communication, and technology. Global poverty rates have decreased, and wealth is more widely distributed than ever before. There have been significant advancements in human rights, gender equality, and social justice.
To drive home the point of today being the “good old days,” I’ll admit that artificial intelligence wrote the prior paragraph.
None of this is intended to sugarcoat anything that the world is facing. Nonetheless, let’s look ahead with optimism, knowing that every American generation has faced its share of challenges and has come back stronger. Over time, markets will reflect whether conditions are getting better or worse. History teaches us that conditions tend to improve over time, even if the path isn’t always straight. It’s why the market, as represented by the S&P 500 Index, has hit a new high every 16 days since 1957 and is only a stone’s throw away from a new high.17
Happy Thanksgiving. Be safe and be well.
Sources: Bloomberg L.P., Invesco as of 11/20/24.
Source: Bloomberg L.P., 11/20/24. Based on the yield to maturity of the Bloomberg L.P. US Treasury Index, Bloomberg US Corporate Bond Index, and Bloomberg US Municipal Bond Index.
Source: US Federal Reserve, Q3-2024, based on debt and liabilities of nonfinancial corporate businesses.
Source: US Census Bureau, 10/31/24, based on the US retail inventory to sales ratio.
Source: US Census Bureau, 9/30/24. Based on estimates of the total housing inventory.
Source: Bloomberg L.P., 11/20/24, based on the price-to-earnings ratio of the S&P 500 Index.
Source: Bloomberg L.P., 11/20/24. The price-to-earnings ratio of the S&P 500 Equal Weight Index is 20.1x compared to an average of 19.4x since 2009.
Source: US Bureau of Labor Statistics, 10/31/24, based on the US Consumer Price Index.
Source: US Bureau of Labor Statistics, 10/31/24, based on US Weekly Earnings.
Source: Council of Economic Advisors, 9/30/24.
Source: US Bureau of Labor Statistics, 10/31/24.
Source: Bloomberg L.P., 11/20/24. Based on the S&P 500 Index.
Source: US Federal Reserve, 6/30/24. Latest data available.
Sources: Bloomberg L.P., American Automobile Association, 11/20/24, based on the prices of US West Texas Intermediate Crude Oil and the Daily National Average of Regular Unleaded Gasoline.
Source: US Department of Energy, 11/15/24.
Source: Bloomberg L.P., 9/30/24.
Sources: Bloomberg L.P., Standard & Poor’s, 11/20/24.
Revisit 2024 themes in “12 months of Above the Noise.” A resilient US economy, contained inflation, and an easing Federal Reserve created a positive backdrop for markets.
The Federal Reserve’s 25 basis point rate cut today wasn’t a surprise, but its new expectation to cut by 50 basis points next year (rather than 100) was.
A growing trend toward fiscal conservatism, the continued importance of monetary policy, increasing geopolitical risks, and technological innovation could drive global markets in the new year.
Important information
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Image: BONNINSTUDIO / Stocksy
All investing involves risk, including the risk of loss.
Past performance does not guarantee future results.
Investments cannot be made directly in an index.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
The Consumer Price Index (CPI) measures the change in consumer prices and is a commonly cited measure of inflation.
Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.
Fixed income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
Inflation is the rate at which the general price level for goods and services is increasing.
US inventory-to-sales ratio depicts the relationship between a company’s end-of-month inventory values and monthly sales.
Leverage measures a company’s total debt relative to the company’s book value.
Municipal securities are subject to the risk that legislative or economic conditions could affect an issuer’s ability to make payments of principal and/ or interest.
The price-to-earnings (P/E) ratio measures a stock’s valuation by dividing its share price by its earnings per share.
West Texas Intermediate (WTI) is a type of light, sweet crude oil that comes from the US.
Yield to maturity is the rate of return anticipated on a bond if it is held until the end of its lifetime.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
The S&P 500® Equal Weight Index is the equally weighted version of the S&P 500® Index.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Bloomberg US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes US dollar-denominated securities publicly issued by US and non-US industrial, utility, and financial issuers.
The Bloomberg US Municipal Bond Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and pre-refunded bonds.
The Bloomberg US Treasury Index measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury.
The opinions referenced above are those of the author as of Nov. 21, 2024. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.
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