Equities Shift Focus While Marching Higher

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

While equities moved higher in a holiday-shortened week, not all sectors were equal as cyclicals gave way to defensives.  Even with the shift in equity sectors that out-performed last week, equity valuations are pushing into the stratosphere.  The top 10 companies in the S&P 500 by market cap exceed any of the prior bull markets by a considerable amount.  As we noted last week, the 3rd year of a bull market (which would be 2025) tends to be in the single-digit range. In addition, when equity markets have risen by more than 20% in back-to-back years, the following year tends to be lower or negative. Initial expectations for 2024 holiday retail sales are rosy, but can the consumer deliver.

The consumer has added to personal debt at a significant pace over the past couple of years while interest rates were on the rise.  In fact, interest rates on credit cards are at all-time highs (23.4%) while delinquency rates are climbing.  Adobe forecasts an 8.4% increase in holiday sales year-over-year, with e-commerce sales expected to hit a record high, but can the consumer deliver with already bloated personal debt?  There are multiple Fed speakers this week, including Chairman Powell, with inflation remaining steady just a little over two weeks before the next Fed meeting on Dec. 18th - at which time the Fed is expected to cut once more for 25 basis points.

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Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

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