The S&P 500 posted its best month of the year in November, rallying 5.73%. The Dow Jones Industrial Average gained 7.5%, mid-caps advanced 8.6% and small caps popped almost 11% on the back of the uncontested presidential election. Bonds advanced 1% and the rest of the developed world (CWI) was flat, while the S&P 500 equal weight (RSP) edged up close to 6%.
TWG Portfolios crushed their respective benchmarks with exposure to small and mid-caps, while avoiding foreign stocks being the largest contributors to the outperformance.

• TWG Growth gained 7% vs its benchmark gain of 4.7%
• TWG Moderate gained 6.15% vs its benchmark gain of 4.1%
• TWG Conservative gained 5.5% vs its benchmark gain of 3.5%

WHAT MOVED THE MARKETS
November ushered in an initial post-election bump then a slump in the second week as rates continued their ascent, the dollar strengthened, inflation came in hotter than desired and Powell saying the Fed does not need to be in a hurry to lower rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” said Powell during remarks to business leaders in Dallas.
Lower jobless claims -the lowest since April – extinguish the markets late summer concerns that the job market is weakening, helping the market continue its surge higher throughout the rest of the month.

PORTFOLIO ADJUSTMENTS

Portfolio adjustments through the month improved diversification and managed overall risk, reducing the S&P 500 position and increasing growth exposure via RPG. RPG proved to be a constructive trade during November as RPG advanced over 10% vs the QQQ’s advance of 6%, signaling that areas of growth other than mega cap technology are showing high potential. A new position in RPV (S&P 500 value) and IWN (small cap value) suggested a move towards including value opportunities, likely in response to market conditions favoring diversified growth coupled with value recovery. This strategic shift enhances portfolios resilience while focusing on growth potential, showcasing a responsive strategy to market dynamics.

LOOKING AHEAD

As we enter the final month of the year, we are encouraged with the underlying strength of the U.S. economy. The labor market, after a brief bout of weakness, is showing signs of stability and is supportive of ongoing consumer spending. Inflation, while pausing its decent, remains well off its high and is constructive to the Fed’s continuation of reducing rates. However, the last mile down to the Fed’s 2% target continues to be a challenge, implying that the Fed may be forced to keep rates higher for longer. Recall at the beginning of the year the market was pricing in five or six rate cuts. Thus far the Fed has only cut rates twice, and the probability of a December rate cut to cap off the year has decreased in recent weeks. Earnings have been robust, unemployment is low, GDP is stable, and borrowing costs are expected to decline in the year ahead.

A change in leadership will create both opportunities and risks for the U.S. economy as we learn about policy considerations from the incoming elected president. While the fundamentals of a strong economy should support further earnings growth, volatility, at least during the initial quarter of 2025, is likely to increase as the news flow reflects adjustments likely to be made by Congress.

We will remain vigilant, follow our objective process, and adjust accordingly, regardless of how things play out. We remain encouraged that we will see another year of gains from the stock market.

We want to wish you a happy holiday season and express our gratitude for being entrusted to prudently manage and grow your investment assets. Our trusted relationship with you is one of the most important aspects of our work, and we appreciate the opportunity to serve.