Market Outlook
Global equity markets cooled last week and gave back most of the post-U.S. election rally from the prior week. U.S. equities across the market capitalization spectrum were led lower by the Health Care sector, which suffered its worst weekly return since 2020. Uncertainty was abound as investors speculated on policy changes from the incoming administration, and solid economic data called into question the path forward for interest rate cuts from the Federal Reserve (Fed). For example, while the Consumer Price Index (CPI) report aligned with consensus expectations, for the first time in almost two years, the six-month average inflation rate did not fall, which suggests inflation remains sticky at elevated levels. Despite the inflation reading, last Friday’s retail sales report showed strong revisions from the prior month and indicated that consumer activity is likely to remain robust into the holiday season. International equities struggled last week as the U.S. Dollar Index hit a new 12-month high.
Chart of the Week
Last week, Chair Jerome Powell remarked that the Fed is in not “in a hurry to lower rates” given cooling inflation and solid labor market conditions.
While financial markets may crave the stimulus of additional rate cuts, we believe Chair Powell’s comments reaffirm that the business cycle remains in a slow expansion phase.
In this macro environment, we believe quality allocations, to companies with strong balance sheets and consistent earnings growth, remain attractive.
