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The Election and the Fed Meeting are Behind Us… What’s Next?: Market Commentary from Cabana’s CEO – November 14, 2024  

1 month ago

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We got through the presidential election and the latest Federal Reserve meeting without so much as a hiccup. The Fed dropped the federal funds rate by 25 basis points, as expected. Trump won by a landslide, which was maybe not so expected. Investors took it all in stride and began rotating into sectors likely to benefit from tariffs on foreign goods (e.g. industrials and cyclicals). Banks jumped on hopes of less regulation. Small-cap stocks finally caught a bid and bounced 5%. I don’t quite get the zeal with small caps as interest rates actually increased on the back of growth and inflation expectations driven by the incoming administration’s policies. Small companies are especially sensitive to borrowing costs, and higher rates for longer aren’t likely to help them. Maybe it was just euphoria over less regulation. Whatever it was, those stocks had a rip-roaring week. Now that the initial reaction is over, what can we expect going forward? 

Well, if we look at the months after the 2016 Trump victory, markets rallied all the way into March. We also are in a favorable spot on the calendar with the last two months of the year being typically strong. Earnings have held up and are beating expectations by a wide margin. So, what is there not to be bullish about? The only thing I can think of is that prices are really stretched – on a macro basis, nearing all-time highs. Maybe all the “de-regulation” and pro-business sentiment can increase earnings enough to warrant higher prices… but maybe not. If no is the answer, then investors are paying a very dear price right now. I personally suspect we move higher into the year’s end, before the hangover sets in. We will know soon enough. 

At Cabana, we remain in our Bullish Scene. 

Disclaimers

January 17, 2024

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