As we navigate the current market landscape, now is the perfect time for investors to reassess their portfolios and explore new strategies. In this issue of Steady Investor, we highlight three key themes to guide your investment approach:
- Bond yields push higher
- An update on Q3 earnings
- Consumer confidence surges in October
Bond Yields Push Higher as Deficit Concerns Grow Ahead of Election – Many investors are expecting budget deficits and the national debt to go up in the next four years—no matter who wins the White House. According to several financial media stories this week, rising deficit expectations have pushed yields on long-duration U.S. Treasuries higher over the past few weeks, as seen in the chart below.1
2-Year U.S. Treasury Bond Yields (Blue Line) and 10-Year U.S. Treasury Bond Yields (Red Line)
Independent analysis shows that Trump’s campaign proposals could expand deficits by $7.5 trillion over the next decade, while Harris’s were closer to $3.5 trillion. The takeaway is the same, however: the U.S. government will need to issue increasing amounts of debt to finance rising spending, which raises concerns about the supply of bonds. When traders get concerned about bond supply, long-term yields tend to rise as they are more a reflection of future expectations for inflation and growth—not a reflection of expected Fed policy. These are all valid arguments and concerns, in our view. But it’s also worth considering that bond yields are still well within normal historical ranges, and yields fell from June to October—a time when both candidates’ policies were already being discussed. We’d also remind investors that candidates’ campaign promises are not foregone conclusions, as many ultimately do not materialize or are watered down substantially on their way to becoming law.
Stock Market Returns in an Election Year
Historical data shows that stocks tend to perform well in election years, and our free guide, Stock Market Returns in an Election Year3, explores this trend in detail.
You’ll learn:
- How stocks have performed in every election year since 1928
- The effect on performance when an incumbent runs for re-election
- How 2024 has compared to election year averages so far
- And more…
If you have $500,000 or more, fill out the form to get your free copy of this special report today—and invest smarter during this election year!
Get Our FREE Guide: Stock Market Returns in an Election Year 3
Q3 Earnings Season is Underway—Here’s What We Know So Far – Through the end of last week, we’ve seen third-quarter results from 182 S&P 500 members, or 36.4% of the index’s total membership. Total earnings for these 182 companies are down -2.1% from the same period last year on +4.5% higher revenues, with 75.8% of the companies beating EPS estimates and 58.8% beating revenue estimates. In the charts below, we can see earnings beat % and revenue beat % in a historical context, which we would characterize as average.4
Looking ahead to the rest of the Q3 reporting period, when we combine the results that have come out with estimates for the still-to-come companies, we expect total earnings for the S&P 500 index to rise +1.5% from the same period last year on +5% higher revenues. The chart below shows the Q3 earnings and revenue growth pace in the context of where growth has been in the preceding four quarters and what is expected in the coming three quarters. As many CEOs have noted in earnings calls, there’s an expectation that Q3 marks the trough for earnings growth.
Consumer Confidence Surges in October, While Job Openings Fall – U.S. consumers’ moods appear to have brightened in October. According to the Conference Board’s consumer confidence index, consumers experienced the biggest one-month acceleration in confidence since March 2021, with the index rising 11% to a reading of 138. The Conference Board’s index of future conditions, which asks consumers how they feel about prospects going forward, increased nearly 8% to 89.1. Generally speaking, a future conditions reading under 80 signals recession conditions. This data comes as the Bureau of Labor Statistics reported that job openings fell to 7.44 million in September, which is roughly equal to the number of available workers.5
Worried About Your Investments This Election Year? Investing during an election cycle means putting political views aside to focus on objective, data-driven decisions.
To navigate this turbulent period, it’s crucial to examine historical market performance from past election years. Our free guide, Stock Market Returns in an Election Year6, offers valuable insights, including:
- How stocks have performed in every election year since 1928
- The effect on performance when an incumbent runs for re-election
- How 2024 has compared to election year averages so far
- And more…
If you have $500,000 or more, fill out the form to get your free copy of this special report today—and invest smarter during this election year!
Disclosure
2 Fred Economic Data. October 29, 2024. https://fred.stlouisfed.org/series/DGS2#
3 ZIM may amend or rescind the guide “Stock Market Returns in an Election Year” for any reason and at ZIM’s discretion.
4 Zacks. October 25, 2024. https://www.zacks.com/commentary/2358098/previewing-big-tech-earnings
5 CNBC. October 29, 2024. https://www.cnbc.com/2024/10/29/consumer-confidence-surges-as-election-nears-job-openings-move-lower.html
6 ZIM may amend or rescind the guide “Stock Market Returns in an Election Year” for any reason and at ZIM’s discretion.
DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.
Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.
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