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November 24, 2024
STOCKS UP AGAIN: Last week, stocks gave back some of the prior weeks' gains. This week, gains resumed. Nvidia didn't help things as its announced earnings fell short of expectations. This dragged on stock prices for the so-called "Magnificent Seven." Alphabet (Google's parent company) also struggled with news of a potential forced sale of Google Chrome. The exchange traded fund (ETF) that holds only the Magnificent Seven stocks (MAGS) was up, but only by 1.25%, about a half a percent lower than the S&P 500. Smaller companies fared better. The Russell 2000, an index of U.S. small cap stocks, rose 4.36% for the week. Over the last six months, the Russell 2000 has outperformed the S&P 500 by over 3%.
LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.
CONSUMER SENTIMENT PERKS UP: The University of Michigan's consumer sentiment index increased to 73 in November, up from 70.05 the month before, and its highest reading in seven months.
MONEY MARKET FUNDS JUST KEEP GROWING: Assets invested in money market funds have surpassed $7 trillion for the first time ever. Money market funds are a relatively safe investment that is currently high-yielding. Assets in these funds have doubled in 4.5 years. The average yield right now is 4.51%. When investors choose a safe 4.5% over the opportunity for higher returns in the stock markets, it shows uncertainty and discomfort in stocks. It also presents opportunity for growth if that uncertainty fades a bit, or if yields decrease. For now, I think these funds are going to stay in record territory. But if confidence in the stock market picks up, there is a whole lot of cash ready to deploy.
AI AND THE COMING ENERGY CRUNCH: The amount of energy needed to power worldwide artificial intelligence is doubling every 100 days. Some hotspot countries for AI data centers, Ireland, Malaysia, and Saudi Arabia, are struggling to keep up with energy demands. The global AI sector is predicted to consume about 3.5% of all electricity by 2030. In the U.S. that projected number is closer to 9%. A potential negative consequence is that the tech sector is often prioritized above other industries which could lead to years-long waits for businesses to access the grid. We could also see more outages and price increases for those living in dense data center markets.
MORTGAGE RATES KEEP CLIMBING: What the Fed does affects the entire economy. But the interest rates established by the Fed are not automatically followed by other financial institutions. Mortgage rates have been climbing, almost back up to 7%. There is a very active market where investors buy and sell bonds issued by the U.S. Treasury. How much are you willing to pay to purchase a bond with a 4% interest rate? The answer to that question determines the yield on that bond. If investors believe the economy is going to grow or inflation is going to pick back up (or both), then investors may not be persuaded by what the Fed is doing now. If economic growth and/or inflation pick up, investors know the Fed will respond by holding the line on interest rates or raising them again. The yield on the 10-year Treasury is what financial institutions pay closest attention to when determining mortgage rates, and that yield has been climbing.
THE NEW CAR: In a recent email, I discussed my recent new car purchase. Some have asked me what I got. I decided to show you a picture of me behind the wheel.
GRATITUDE: Make sure you read the quotes below. As we enter into a week that includes a day called "Thanksgiving," it is a good time to take stock of the things for which you are grateful. In the 1621, the Pilgrims could have focused on the death and illness they had experienced the winter before, and their trepidation in facing their second severe winter. Instead, they focused on those things for which they were grateful, including the Wampanoag who had helped them get to a better place, and whom they invited to join them (despite their political and religious differences!).
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
"There are two ways to get enough. One is to continue to accumulate more and more. The other is to desire less." G. K. Chesterton
"Keep your lives free from the love of money and be content with what you have." Hebrews 13:5 (NIV)
SOURCES:
STOCKS UP AGAIN: https://finance.yahoo.com/news/live/stock-market-today-dow-closes-at-record-sp-500-nasdaq-rise-as-wall-street-notches-strong-weekly-gains-210023486.html AND YCharts.com
CONSUMER SENTIMENT PERKS UP: https://gritcap.io/p/all-eyes-on-nvidia
MONEY MARKET FUNDS JUST KEEP GROWING: https://gritcap.io/p/money-markets-hit-all-time-highs
AI AND THE ENERGY COMING ENERGY CRUNCH: https://oilprice.com/Energy/Energy-General/US-is-Facing-a-Major-Energy-Crunch-Due-to-AIs-Insatiable-Demand.html AND https://www.zerohedge.com/energy/ais-insatiable-appetite-energy-threatens-irelands-grid
MORTGAGE RATES KEEP CLIMBING: https://www.yahoo.com/tech/mortgage-rates-suddenly-rising-again-142800043.html
(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.
*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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