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Writer's pictureDoug MacGray
Nov 106 min read

Stocks and Mortgage Rates Up, and Bruce Cockburn

November 10, 2024


THE ELECTION:  I had someone complement me last week on how I keep this email away from either side of the political spectrum. I try. I'm sure I am not always successful, inadvertently touching on a sensitive issue, or describing the economy too positively or negatively (I have been scolded). The purpose of this email is not politics or persuasion. I am trying to inform. Having said all that, it is impossible not to bring up the election. We always consider elections and discuss them internally as political events and activities can impact the markets and certainly affect the economy. As large elections draw closer, we consider whether we should make any changes to portfolios. Of course, ultimately, the performance of the economy largely determines the directions of stocks and bonds. Political events tend to create short-term volatility (positive or negative). We are seeing some of that now. With Republicans taking the Senate and the executive branch, and perhaps holding the House (as I write this, CNN reports that Republicans have 213 and Democrats 205, with 218 needed for a majority), markets will be parsing all words of the President-Elect for how the economy will be affected by likely actions in the early part of next year. The actions of political leaders affect the economy. Will the deficit go up too much? Will inflation move up again? Will deregulation unleash economic activity? Will tax cuts (or at least keeping the current tax cuts from expiring) create economic growth, and if so, for how long? Will deportations hurt the economy, and if so, for months or years? What will the relationship between the executive branch and the Fed look like? How will tariffs be implemented and will they be inflationary? Will there be significant unrest? How will geopolitical events turn out, and how will they affect the U.S. economy? How is China going to react to the actions of the new administration? There are a lot of questions.


THE FED CUTS RATES:  The Fed, as expected, lowered its key interest rate by 0.25%.  In its announcement, the Fed signaled uncertainty as to how quickly it will continue lowering rates.  It wants to prevent the current higher rates from unnecessarily slowing the economy.  Fed chair, Jerome Powell, stated that he fully intends to serve the rest of his term (expires in May 2026) irrespective of the election results, saying he would refuse to step down if asked to resign.  Powell said it was too soon to say how the new administration's policies will shape the Fed's economic outlook.  At this point it is anyone's guess as to where the Fed will end this cycle, with economists predicting somewhere between 2% to 4%.  Said Powell:


"Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated."


BEST WEEK OF THE YEAR:  The markets reacted positively to the election and the prospect of tax cuts and reduced regulation. All 11 of the S&P 500's sectors ended the week higher. Small stocks did even better. The Russell 2000, a U.S. small cap stock index, was up 8.57% for the week. The Fed rate cut (see above) was as expected, but helped the markets nonetheless. Also helping was the University of Michigan's Consumer Sentiment Index which climbed to 73 this month, up from 70.05 in October and the highest since April.  



LONGER-TERM PERFORMANCE:  Below are the annualized three-year and five-year numbers for these same indices.  



WHAT'S GOING ON WITH MORTGAGE RATES?:  On September 26, shortly after the Fed first lowered its rate by 0.50%, the average 30-year mortgage in the U.S. bottomed out at 6.08%. Since then it has climbed back up to 6.79%. The Fed wants rates to go down, but lowering its rate does not always, or immediately, translate to lower rates more broadly. The mortgage rate, in particular, is heavily influenced by the yield on the 10-year Treasury bond. That rate goes up and down depending on economic expectations. Because the outlook for the economy is strong, yields are staying stubbornly high, keeping mortgage rates high. Some believe that the new presidential administration's promises of tax-cuts and tariffs might increase economic growth and inflation which could impede the decline of interest rates. According to Fannie Mae, the Mortgage Bankers Association, the National Association of Homebuilders and Wells Fargo, rates will likely fall to the high 5's, but no lower than 5.7% in 2025.


NORWAY:  Norway's central bank held its key policy rate steady at 4.5%, where it has been since December of 2023.


IRS ANNOUNCES 2025 PLAN LIMITS:  The amount of money an employee can defer in a 401(k) or 403(b) plan is increasing from $23,000 to $23,500. Anyone who turns 50 during the year 2025 can make an additional $7,500 contribution (unchanged from 2024). There is now a new age 60-63 catch up provision that increases the catch up to $11,250 for that narrow window. If you are in that category, take advantage of it!


EXPENSIVE WEDDINGS:  I'm old, so I scratch my head a bit at how much goes into weddings now. The average cost of a wedding in the state where I reside, Delaware is currently $39,000. That is cheap compared to our neighbor, New Jersey, which has the most expensive weddings, with its average coming in at $55,000. The cheapest is Utah at $17,000. Pennsylvania is $38,000. The second highest is New York at $49,000. California is $41,000. All the New England states are between $42,000 and $44,000.


CABLE NEWS WATCHERS ARE OLD:  And speaking of old, the average viewer of MSNBC is 70. Not far behind are Fox News (69) and CNN (68). I get my news from lots of sources as I need to be informed to do my job well. I often ask younger people where they get their news, and the answers vary wildly from podcasts, to TikTok, to Twitter or X, to Substack, to Instagram to YouTube, and many other sources. It will take a while to figure out where media ends up five to ten years from now, but it is going to look a lot different than now.


TAKING THE PLUNGE:  Okay, it is time, and I need a challenge to get me motivated. So, I signed up for the Delaware marathon on April 6. Wish me well!



BRUCE!:  Not many people share my enjoyment of the music of Bruce Cockburn. He is a 79-year-old singer-songwriter and guitarist extraordinaire. He is from Canada, and much more famous up there, but he has had some hits reach the U.S. charts ("Wondering Where the Lions Are," "If I Had A Rocket Launcher," "Lovers in a Dangerous Time"). His first album and first chart hit was way back in 1970. I began following him in college. I saw him in concert with his band in Boston in the 1980s, by far the best concert I have ever attended. And on Saturday night, I got to see him again in Collingswood, New Jersey. He is doing a solo tour, just him and a couple of his guitars. In Wikipedia they state that his lyrics reflect "interests in spirituality, human rights, environmental issues, relationships, and his experiences in places like Central America and Africa." His lyrics have significant depth. I don't always agree with his takes on issues, but I love his music and poetry. My wife does not share my passion, but she agreed to come see him with me. 


One of my favorite songs is Closer to the Light which he wrote in 1993 when his friend, singer-songwriter Mark Heard, died suddenly at 41. For those unfamiliar with Bruce Cockburn, this gives you an idea as to how he communicates through song.


There you go

Swimming deeper into mystery

Here I remain

Only seeing where you used to be

Stared at the ceiling

'Til my ears filled up with tears

Never got to know you

Suddenly you're out of here


Gone from mystery into mystery

Gone from daylight into night

Another step deeper into darkness

Closer to the light


Walked outside

Summer moon was nearly down

Mist on the fields

Holy stillness all around

Death's no stranger

No stranger than the life I've seen

Still I cry

Still I begged to get you back again


Gone from mystery into mystery

Gone from daylight into night

Another step deeper into darkness

Closer to the light


Written by Bruce Cockburn

© 1993 Golden Mountain Music Corp. (SOCAN)


Have a great week!


Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.



Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax

(610) 628 4545


"Sun's up, uh huh, looks okay - the world survives into another day, and I'm thinking about eternity. Some kind of ecstasy got a hold on me." Bruce Cockburn, Wondering Where the Lions Are


"Be kind to one another, tenderhearted, forgiving one another."  Ephesians 4:22 (NIV)


SOURCES:

CABLE NEWS WATCHERS ARE OLD: WSJ.com


(c) 2024 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved


Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission. 


SDG


*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.

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