November 5, 2024

Brace Yourself: Why This Week Could Make or Break the Stock Market in 2024

Brace for Impact: U.S. Stocks Face a Crucial Week Ahead

The U.S. stock market recently enjoyed a record-setting rally, but as we approach the first week of November 2024, investors should remain vigilant. With election anxieties, fluctuating interest rates, critical earnings reports from technology giants, and the monthly jobs data looming, this week could very well be the scariest stretch for stocks yet in 2024.

The Weight of Earnings Reports

After the S&P 500 index took a hit on Friday, the focus shifts to earnings from major technology companies that are responsible for driving significant market momentum. Despite an impressive 22% surge in Tesla Inc.’s stock following its third-quarter earnings announcement, the index concluded the week lower.

On the docket for this week are earnings from Alphabet Inc. on Tuesday, Microsoft Corp. and Meta Platforms on Wednesday, and Apple Inc. and Amazon.com Inc. on Thursday. The anticipation surrounding these “Magnificent Seven” companies is palpable, as their performance may offer critical insights into the broader market’s trajectory. Wealth management experts like Eric Beiley at Steward Partners strongly emphasize the importance of strong earnings amidst historically high valuations.

A Look at Interest Rates

The Federal Reserve’s interest rate policies have become a significant backdrop for investor sentiment. Recently, the U.S. Treasury market has reacted sharply, with rising yields reflecting both economic resilience and underlying concerns about potential inflation. Investing expert Dec Mullarkey notes that the upcoming presidential election has only heightened these anxieties, evident in the substantial fluctuations observed in the Treasury market.

The 10-year Treasury yield peaked at 4.23%, indicating an increasing cost of borrowing for consumers, businesses, and government alike. This kind of environment does not foster optimism. Wall Street remains skeptical that significant policy changes will happen, irrespective of whether Vice President Kamala Harris or former President Donald Trump secures the presidency.

Jobs Report: A Critical Indicator

This Friday, the monthly jobs report will further shape the narrative. Analysts caution that this month’s data may present irregularities due to the ongoing strikes at Boeing Co. and the impact of recent hurricanes. However, strong employment numbers from September had momentarily alleviated fears around a downward economic spiral, unfortunately setting the stage for potentially high inflation concerns if wages rise too quickly.

Keith Lerner, co-chief investment officer at Truist Advisory Services, adeptly explained that while the jobs report might dominate headlines for just one day, the elections will likely overshadow the immediate economic data.

Election Anxiety: A Growing Concern

Though the U.S. economy has proven to be strong in 2024, the reality remains that not all households have emerged from the COVID crisis on solid ground. The sharp selloff in U.S. government debt since September can be directly tied to an unexpectedly robust economy, forcing the bond market to reassess anticipated Fed rate cuts.

Many industry insiders are honing in on the election, whispering about its potential to upend the markets. The increasing anxiety surrounding the election is palpable in both the debt and gold markets. Mullarkey warns that should election results lead to heightened tensions, gold could see further price increases, fueled by the recent uptick in central bank buying.

The Broader Market Landscape

As we look at the performance of key market indices, it’s worth noting that the Dow Jones Industrial Average fell 2.7% last week, while the Nasdaq Composite Index managed a minor gain of 0.2%—extending its win streak to seven straight weeks. The S&P 500 closed down 1%. All major indices remain within 3% of their record highs, exhibiting a fine line between potential growth and imminent risk.

Conclusion: Stay Prepared

The coming week represents a crucial crossroads for the U.S. stock market. Factors like earnings from tech giants, the imminent jobs report, and the election’s influence on economic policy could have dramatic implications for investors moving forward. For anyone looking to the markets for growth opportunities, this moment demands careful consideration and prudent action. With tradition at the forefront, it’s crucial that we adhere to time-tested financial principles while navigating the uncertainty ahead.

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