The Week in Review: November 25, 2024
Does a Republican Sweep Matter for Investors?
Tables and graphics such as the one below typically surface every four years. While they are interesting, they do not provide much insight, except for the idea that stocks tend to perform well regardless of who occupies the White House and Congress.
As the table illustrates, markets have historically performed slightly better under a divided government. On average, the S&P 500 has returned 8.0% under single-party control and 9.9% under divided government (Both/all scenarios category).
Maybe the gridlock that usually ensues from a divided government prevents a single party from enacting policies that might hurt the economy.
Based on the recent landscape, stocks have performed well under President Obama, President Trump’s first term, and President Biden, per S&P 500 data from the St. Louis Federal Reserve.
The market’s advance, however, wasn’t without volatility, but volatility has always been a part of the investing landscape.
As we prepare for 2025 and the new administration, the bulls are betting that the upbeat economy will fuel a rise in corporate profits at a time when the Fed is not planning rate hikes.
From a political perspective, there is no discussion about raising the 21% corporate tax rate, nor is there talk of increasing taxes on the wealthy or taxing unrealized capital gains. Moreover, bullish sentiment is supported by an expected deregulatory push next year.
The bears, however, point to today’s high valuations, the recent rise in bond yields, and expectations for fewer rate cuts in 2025.
From a political perspective, some concerns that sweeping new tariffs could offset bullish tailwinds from tax policy and deregulation, as higher levies on imports could raise consumer prices at home and invite retaliation against U.S. exporters.
Over an extended period, the economy, corporate profits, inflation, and Federal Reserve policy have been the primary factors influencing the direction of the stock market, not politics.
And profits, inflation, and Fed policy are determined by economic performance.
Market Summary
Two for the Road
More than a decade ago, private equity giant Blackstone began spending hundreds of millions of dollars on family homes that went into foreclosure after the 2008-2009 global financial crises, creating a completely new asset class for institutional investors. Since then, corporate landlords have bought more than 600,000 houses across the United States. - The Wall Street Journal, October 30, 2024
Amazon’s Web Services revenue over the last 12 months ($103 billion) was higher than the revenue of 468 companies in the S&P 500, meaning AWS alone outpaces nearly 94% of the index’s firms. - Investor Observer, November 5, 2024
Please do not hesitate to contact me with any questions or concerns. I hope you have a wonderful week!
Happy Thanksgiving!
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
Stordahl Capital Management, Inc is a Registered Investment Adviser. This commentary is solely for informational purposes and reflects the personal opinions, viewpoints, and analyses of Stordahl Capital Management, Inc. and should not be regarded as a description of advisory services or performance returns of any SCM Clients. The views reflected in the commentary are subject to change at any time without notice. Nothing in this piece constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Advisory services are only offered to clients or prospective clients where Stordahl Capital Management and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Stordahl Capital Management unless a client service agreement is in place. Stordahl Capital Management, Inc provides links for your convenience to websites produced by other providers or industry-related material. Accessing websites through links directs you away from our website. Stordahl Capital Management is not responsible for errors or omissions in the material on third-party websites and does not necessarily approve of or endorse the information provided. Users who gain access to third-party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from the use of those websites. Please note that trading instructions through email, fax, or voicemail will not be taken. Your identity and timely retrieval of instructions cannot be guaranteed. Stordahl Capital Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
1. The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2. The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3. The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4. The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5. CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
6. CME Group continuous contract; Prices can and do vary; past performance does not guarantee future results.