Week of November 11th, 2024

Key Points for the Week

• The US election is officially over, and Donald Trump will become the 47th President of the United States.
• Stocks soared on the news, as worries over a drawn-out fight over the winner did not happen. It was the best week of the year for stocks, with small cap, midcaps, and cyclicals leading.
• The economy continues to move ahead thanks to a healthy consumer, solid labor market, solid profits, and strong services data.

Current Trends & News is a weekly financial recap curated by SPC Financial®’s team of wealth management and tax-integrated advisors.* We monitor and explore the intricacies of the financial world and share insights into market developments.

Economic Update

Last week, United States stock markets rallied, and the U.S. dollar gained against other currencies, following the presidential election. The CBOE Volatility Index, Wall Street’s Fear gauge, also moved lower after concerns about a long wait for election results were quelled by a swift result, reported Alexandra Semenova of Bloomberg.

“…the [stock] markets roared in approval of this Trumpvember surprise…Yes, expect tax cuts, less regulation, fewer guardrails, and a government no longer picking winners and losers (except for tariffs), all reasons why investors perceive the incipient environment to be advantageous. And yet, with all the dancing, dancing, dancing in the streets, note that this new freedom could be accompanied by greater risk in the capital markets.”

↳Andy Serwer, Barron’s

The bond market’s response to the election was measured. The Federal Reserve (Fed) began lowering the federal funds rate in September. Typically, Fed rate cuts lead to lower borrowing costs for consumers and businesses, which supports economic growth. However, the yield on the 10-year U.S. Treasury, which is a benchmark for mortgage rates, corporate bonds, and other loan rates, has trended higher since September as strong economic data caused the market to rethink its expectations for future rate cuts.

Now, the bond market is evaluating future rate cuts in the context of the new administration’s policies.

“…the outlook for further rate cuts has been clouded by expectations that key elements of Trump’s economic platform such as tax cuts and tariffs will lead to faster growth and higher consumer prices. That could make the Fed wary of risking an inflationary rebound by cutting rates too deeply next year.”

↳Davide Barbuscia and Lewis Krauskopf, Reuters

Markets are likely to remain volatile over the coming weeks as investors speculate about the impact of new policies on financial markets. Last week, major U.S. stock indices surged higher. Yields on U.S. Treasuries were mixed with yields moving lower on the shortest and longest maturities and rising for other maturities.

This Week in the Markets and the Election

With the presidential election now over, it is essential to remember that, historically, who is in the White House has virtually no link to how the stock market will do.

Yes, technically returns are slightly better under Democratic Presidents than Republicans, but the flipside to this is that stocks do much better when Republicans control both chambers of Congress compared to when both chambers are blue.

Below is a chart that goes back to 1900 showing that stocks tend to go higher, regardless of who is in the White House.

What Happened?

Many noted how the 2022 midterms came in much closer to expectations and that maybe this time so would the presidential election, but this was yet another election involving President Trump that saw his eventual numbers come in better than expected.

President Trump is projected to win 312 electoral votes compared with Vice President Harris’s 226. This is more than the 304 he won in 2016 and more than the 306 President Biden won in 2020. It is the most for a Republican President since 1988, but it trails the 365 (2008) and 332 (2012) President Obama won in his two elections.

The big surprise for many, though, was Trump won the popular vote as well, the first Republican to do this since 2004.

Stocks Loved the News

Optimism over lower taxes, deregulation, animal spirits, and improved small business confidence all sparked a stock rally the day after the election, with the Dow up more than 1,500 points for the fourth-largest point gain ever, while the 3.6% gain was the best in exactly two years.

The S&P 500 soared the day after the election, which was the best post-election day ever. Be aware though, it also jumped 2.2% when President Biden won in 2020. The last eight elections stocks moved at least 1% the day after the election, so post-election day volatility is normal.

Small caps were the big winner on the day, though, as the Russell 2000 had its best day since November 2022. This was interesting, as yields soared and the past few years have seen higher yields as a negative for small caps, but optimism over lower taxes may have sparked the rally.

There Was No Post-Election Uncertainty

Another reason why stocks may have gained after the election was there was no long and drawn- out drama around who would win. Stocks can take good news, they can even take bad news, but they cannot take uncertainty.

Many of the same polling experts were telling us it might take many days (or even weeks) to get the results. Instead, it was clear President Trump was going to win, and as a result stocks gained as another potential black cloud was lifted.

Yields Soared

The 10-year yield continued to move higher, just as it has done since the Fed cut rates in September. In the end, the 10-year yield added 0.14 points to close at 4.43%, the highest level since July. This sent bonds tumbling, as remember that higher yields hurt bond prices and vice versa.

Potential higher deficits, more spending, better economic growth, and tariffs (which are potentially inflationary) were all cited as reasons for the move higher. In a perfect world, you do not want yields to continue to move much higher, as it would hurt the housing market and potentially small companies as well.

The bottom line is yields have moved drastically higher since the Fed cut rates in September, and we think there is a good chance this move has gone too far and lower yields could be coming over the coming months.

So, What Really Matters?

Of course, who is in the White House matters, but there are things that matter a lot more for investors. How the economy is doing, Fed policy, inflation, valuations, and overall market trends potentially matter much more.

Right now, we are looking at an economy that is outperforming and showing no signs of slowing down. Productivity is at some of the best levels since the late ‘90s. We have a stable, but slowing, labor force. Earnings are at record levels. The services sector (which makes up more than 60% of our economy) is very strong, and not to be ignored, the Fed is quite dovish.

Lastly, aggregate income growth is running at a 6.4% annualized pace over the past three months. That is well above the 4.1% pace we saw pre-pandemic. When people are employed and their income is growing well above inflation, you have a big driver for continued solid economic growth.

Now What?

Previous years that were up similarly to 2024 heading into the final two months NEVER saw those final two months lower — they were higher 14 out of 14 times, with November up 12 times and December up 11 times.

Looking at the past 10 elections, we found that stocks were higher a year later after nine of them, and up more than 15% on average. Rallies after elections have been quite common the past 40 years.

A Record Number Did not Vote

Although the numbers are not final yet (as some states continue to count votes), it is looking like a record number of people who were eligible to vote chose not to, with more than 98 million not voting in the 2024 election. This is up from just over 82 million four years ago. In fact, we saw a record number of nearly 159 million people vote four years ago, but this dropped nearly 13 million in total, the largest such drop ever.

It Is a Dirty Job

If you are a fan of baseball, you probably know that major league baseball teams do not use balls that are fresh out of the box. In fact, the Official Baseball Rules for 2024 explains umpires’ pregame duties which include:

“Receive from the home Club a supply of regulation baseballs, the number and make to be certified to the home Club by the Office of the Commissioner. The umpire shall inspect the baseballs and ensure they are regulation baseballs and that they are properly rubbed so that the gloss is removed. The umpire shall be the sole judge of the fitness of the balls to be used in the game.”

Usually, the gloss is removed by rubbing Lena Blackburne Baseball Rubbing Mud into the unused baseballs.

“Originally marketed as ‘magic,’ it is just a little thicker than chocolate pudding—a tiny dab is enough to remove the factory gloss from a new ball without mucking up the seams or getting the cover too filthy. Equipment managers rub it on before every game, allowing pitchers to get a dependable grip.”

↳Emma Baccellieri, Sports Illustrated

The mud is sourced from a secret location, somewhere along a tributary of the Delaware River, and has been passed from generation to generation of this family business since the 1930s.

According to Jim Bintliff, the owner of Lena Blackburne Baseball Rubbing Mud, the mud is unique.

“The mud has a high clay content in the soil, an oddity for the area, plus brackish water from the tributary mixing with ‘cedar water’ dropping from nearby trees. Perfect conditions exist for only about a mile.”

↳Jim Bintliff via Emma Baccellieri, Sports Illustrated

Recently, researchers at the University of Pennsylvania School of Engineering and Applied Science and School of Arts & Sciences studied the mud and then published their findings in Proceedings of the National Academy of Sciences. According to ScienceDaily, the paper’s lead author devised three experiments to determine whether mudding baseballs is a superstition, like rally caps and playoff beards, or a value-adding process. The experiments measured the mud’s spread-ability and stickiness, as well as any change in “friction against the fingertips.”

The experiments confirmed baseball players’ long-held belief that magic mud really does improve the performance of baseballs. The substance “spreads like a skin cream and grips like sandpaper,” according to the research.

A Reminder About Scams

Scams usually start with a phone call, email, text, or another form of communication. The person typically claims to be from an agency or organization you know – or one that sounds like it might benefit you, such as the National Sweepstakes Bureau or a lottery.

The person may know your name and address. They may give you their official title or an identification number. No matter how official they seem, you can be confident it is a scam if the person contacting you:

• Indicates there is a problem with your benefits.
• Asks you to pay to receive a prize.
• Suggests that paying will increase the chance of winning.
• Requests financial information, such as a bank account or credit card number.
• Pressures you to act immediately.
• Tells you to pay using a specific method, such as a gift card or cryptocurrency.

If this happens, remember that the Social Security Administration, the Internal Revenue Service, Medicare, and your bank do not call, email, or text to ask for money or personal information. They do not demand that you pay immediately, and they do not accept payment by gift card, prepaid debit card, cryptocurrency, or another untraceable form of money transfer.

When you suspect a scam:

• Hang up or close the message. Do not respond in any way.
• Remain calm.
• Think back over the call. Write down any personal information you may have inadvertently shared.
• Report the scam. Contact the Federal Trade Commission at ReportFraud.ftc.gov. You may also want to report the incident to your state’s attorney general or your local consumer protection agency.
• Share your knowledge. Talk with family, friends, and neighbors about your experience so they know what to look out for.

When you receive a digital message, no matter how official it seems, do not click on any links. Do not give or confirm any personal information, including your name, birth date, phone number, address, email address, place of birth, driver’s license, passport, or Social Security numbers, bank or other account numbers, and PIN numbers.

Being skeptical can keep you safe. Remove yourself from the situation. Do not share information. If you feel anxious and need to confirm that it was a scam, contact the organization using a method provided on their official website.

How To Avoid Tax Scams

Below is a link to a video provided by the IRS to help avoid tax scams:

https://www.youtube.com/@irsvideos

If you have any questions, please contact us.

The Social Security Lock

The Social Security Lock (also known as the "Social Security Number (SSN) Lock") is a feature provided by the Social Security Administration (SSA) that allows individuals to block electronic and automated access to their Social Security records. This is primarily a security measure to prevent unauthorized or fraudulent use of your Social Security Number (SSN), particularly to help prevent identity theft.

How the Social Security Lock Works:

• Blocking Access: When you activate the lock on your SSN, it prevents others (and yourself) from accessing your Social Security records through electronic means, such as through automated phone systems or online services.
• Protecting Your Information: This feature is especially helpful if you are concerned about identity theft or if your SSN has been compromised. It reduces the likelihood that someone can fraudulently open accounts, apply for credit, or access benefits using your SSN.
• Unlocking for Legitimate Use: If you need to use your SSN for legitimate reasons, such as applying for benefits, you can temporarily unlock or remove the SSN Lock by contacting the SSA. You can also re-lock it after your transaction is completed. __ How to Enable or Disable the Social Security Lock:__
• Visit the SSA Website: Go to the Social Security Administration’s website and sign into your mySocialSecurity account (you will need to create an account if you do not have one).
• Enable SSN Lock: Look for the option to lock your SSN and follow the prompts to activate the lock.
• Disable SSN Lock: If you need to unlock your SSN for any reason, you can do so temporarily by following the same process.

Important Notes:

• The SSN Lock applies to automated access to your records. It does not stop manual processing of benefits or in-person requests for information.
• The lock is a good idea if you are not currently using your SSN often, but you should keep in mind that it requires proactive management, especially if you need to access benefits or financial services in the future.

This tool provides an extra layer of protection but does not replace the need for vigilance regarding the use of your Social Security Number in other situations, like sharing it with third parties or financial institutions.

Corporate Transparency Act

The Corporate Transparency Act was enacted in 2021 and was passed to enhance transparency in entity structures to combat money laundering, tax fraud, and other illicit activities.

Beginning January 1, 2024, certain business entities created or registered to do business in the United States will be required to report identifying information about the beneficial owners to FinCen, the Financial Crimes Enforcement Network. Per FinCen rules, a beneficial owner is an individual or group of individuals who, directly or indirectly, owns or controls the company. Reporting companies typically include:

• Domestic reporting companies: Corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
• Foreign reporting companies: Entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with the secretary of state or any similar office.

FinCen has updated their FAQs that includes new information about the reporting process, reporting companies, reporting requirements and much more, with the expectation that further guidance will be provided in the future. The updated FAQs can be found here.

Did you Know? This Week in History

November 13, 1982: Vietnam Veterans Memorial Dedicated

Near the end of a weeklong national salute to Americans who served in the Vietnam War, the Vietnam Veterans Memorial was dedicated in Washington, D.C. after a march to its site by thousands of veterans of the conflict. The long-awaited memorial was a simple V-shaped black granite wall inscribed with the names of the 57,939 Americans who died in the conflict, arranged in order of death, not rank, as was common in other memorials.

The designer of the memorial was Maya Lin, a Yale University architecture student who entered a nationwide competition to create a design for the monument. Veterans and families of the dead walked the black reflective wall, seeking the names of their loved ones killed in the conflict. Once the name was located, visitors often made an etching or left a private offering, from notes and flowers to dog tags and cans of beer.

The Vietnam Veterans Memorial soon became one of the most visited memorials in the nation’s capital. A Smithsonian Institution director called it “a community of feelings, almost a sacred precinct,” and a veteran declared that “it’s the parade we never got.” “The Wall” drew together both those who fought and those who marched against the war and served to promote national healing a decade after the divisive conflict’s end.

Weekly Focus

Baseball is 90 percent mental. The other half is physical.

Yogi Berra, Former Major League Baseball Player

My whole family are psychics. I was born with the gift of hindsight, I realized later.

Luke Rollason, Comedian