Market Update for October 17, 2024
It has been a while since my last post, but rest assured we have had a productive, fruitful year here at First Financial Associates. New and established clients alike have made money within their accounts, and generally higher interest rates have provided a tolerable return for those preferring a measure of safety vs. the stock market. Here are some of my current political thoughts in no particular order:
1. The markets generally seem comfortable with EITHER Presidential candidate, even if the majority of Americans wish we had better options. The US stock market broadly showed no hesitation or worry when Kamala replaced Biden as the Democratic nominee, just as it seems copacetic with another Donald Trump term in office. This is my read, as the political ebbs and flows do not appear to be producing similar stock market movements. American Funds wrote an extensive white paper on the history of Presidential elections and the predictive performance of the markets related thereto- I can provide a copy for you digitally or on paper if you wish.
2. Trump wants to extend the “Tax Cuts and Jobs Act” (TCJA) enacted under his Presidency on January 1, 2018, with the personal tax changes’ portion of that Act otherwise set to expire at the end of 2025. Kamala Harris would let them expire.
3. Kamala has voiced support for a 28% capital gains tax bracket- currently the highest bracket is 20%. Trump is unlikely to endorse such an increase.
4. Trump wants extensive and permanent tariffs on imported goods from many countries, and the strictest amongst those China. Kamala has not highlighted tariffs as a key part of her economic platform.
5. MY TAKE: I want representation from both Democrats and Republicans across the three branches of federal government. This creates the biggest quagmire in terms of “changing the rules,” and it is the opacity of rules’ changes that causes many issues in the stock market, historically. Neither candidate is anti-capitalist, and stocks could thrive going forward under either leader. The 800-lb gorilla in the room is our $35.7T national debt- and all either side can do regarding this topic is claim that their new offers to the American people will not materially make this number WORSE.
One other comment - I have said many times the market either feels great but expensive, or bad but cheap, almost all the time. We are absolutely in the “feels great but boy are things getting expensive” camp right now. While I will always accept new monies from clients, I think from today expectations for near-term gains should be tempered. A 5-10% retracement of recent gains would be normal, and would create some ashes from which the phoenix could rise. This would be a natural, healthy market. I am not calling for a bear market or anything terrible- just that a pause in recent momentum could be a necessary evil in terms of the next 12-18 months’ of stock market performance. Put differently, if we do not get a 5-10% correction before year-end, I would expect 2025 to underperform general expectations, as some of the 2025 gains could be pulled into late-2024.
In terms of both health and wealth, I hope you all have a great end to 2024, and I will be in touch in various ways with each of you in the coming months.