Monthly Market Update

Jobs Report Slowed Sharply in October

• Gross Domestic Product ⁽¹⁾⁽²⁾ (4Q24): The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2024 is 7% on October 31.
• Employment ⁽³⁾⁽⁵⁾ (October): Total nonfarm payroll employment was essentially unchanged in October (+12,000), and the unemployment rate was unchanged at 4.1%, the U.S. Bureau of Labor Statistics reported. Both the labor force participation rate, at 62.6%, and the employment-population ratio, at 60.0%, changed little in October. Employment continued to trend up in health care and government. Temporary help services lost jobs. Employment declined in manufacturing due to strike activity.
• Inflation ⁽⁴⁾ (September): The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% on a seasonally adjusted basis, the same increase as in August and July, the U.S. Bureau of Labor Statistics. Over the last 12 months, the all items index increased 2.4% before seasonal adjustment. The index for all items less food and energy rose 0.3% in September, as it did the preceding month. The all items less food and energy index rose 3.3% over the last 12 months.
• The Producer Price Index (PPI) (September): The Producer Price Index for final demand was unchanged in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. On an unadjusted basis, the index for final demand rose 1.8% for the 12 months ended in September.
• Retail and Food Services Sales ⁽⁶⁾ (September): Advance estimates of U.S. retail and food services sales for September 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $714.4 billion, an increase of 0.4% (±0.5%) from the previous month, and up 1.7% (±0.5%) from September 2023.
• Personal Income and PCE ⁽⁹⁾ (September): Personal income increased $71.6 billion (0.3% at a monthly rate) in September, according to estimates released by the U.S. Bureau of Economic Analysis. From the preceding month, the PCE price index for September increased 0.2%.  Excluding food and energy, the PCE price index increased 0.3%. From the same month one year ago, the PCE price index for September increased 2.1%. Food prices increased 1.2% and energy prices decreased 8.1%. Excluding food and energy, the PCE price index increased 2.7% from one year ago.

World Growth Projections Updated

According to the Organization for Economic Co-operation and Development (OECD), Global growth is expected to stabilize over the projection period at 3.2% in both 2024 and 2025, broadly in line with the average pace observed through the first half of this year. Growth was robust in the United States, the United Kingdom, Canada and Spain. Domestic demand has buoyed activity in Brazil, India, and Indonesia.

Organization for Economic Co-operation and Development (OECD) (September 2024):

Fed Minutes Show Officials Divided on Rate Cuts

The last FOMC meeting took place on September 18^th, 2024. The Committee decided to cut federal funds rates for the first time since March 2020 to the target range of 4.75% to 5.00%. As of this writing, markets are pricing in at over a 99% of a 25-bps cut at the November 7^th, 2024, meeting. ⁽⁷⁾⁽⁸⁾

Highlights of FOMC Minutes:

• Minutes Expressed Greater Confidence Towards Inflation Objective: “Participants noted that inflation had made further progress toward the Committee’s objective but remained somewhat elevated. Almost all participants expressed greater confidence that inflation was moving sustainably toward 2%. Participants also observed that recent indicators suggested that economic activity had continued to expand at a solid pace, job gains had slowed, and the unemployment rate had moved up but remained low”.
• Substantial Majority Backed Half-Point Rate Cut:” Given the significant progress made since the Committee first set its target range for the federal funds rate at 5¼ to 5½%, a substantial majority of participants supported lowering the target range for the federal funds rate by 50 basis points to 4¾ to 5%. These participants generally observed that such a recalibration of the stance of monetary policy would begin to bring it into better alignment with recent indicators of inflation and the labor market. They also emphasized that such a move would help sustain the strength in the economy and the labor market while continuing to promote progress on inflation, and would reflect the balance of risks
• Other Participants Would Have Preferred a 25bps Cut: “Some participants noted that there had been a plausible case for a 25-basis point rate cut at the previous meeting and that data over the intermeeting period had provided further evidence that inflation was on a sustainable path toward 2% while the labor market continued to cool. However, noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred a 25-basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision”.
• Inflation Risks Ease: “Almost all participants saw upside risks to the inflation outlook as having diminished, while downside risks to employment were seen as having increased. As a result, those participants now assessed the risks to achieving the Committee’s dual-mandate goals as being roughly in balance”.

Monthly and YTD returns

Source: Morningstar asset class screening total return 1 month USD and total return YTD as of November 1^st, 2024¹⁰

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Definitions:

• ⁽¹⁾ Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).
• ⁽²⁾ GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
• ⁽³⁾ The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earningsof workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
• Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
• ⁽⁴⁾ The Consumer Price Index (CPI):Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
• ⁽⁵⁾ The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a percentage of the labor force. Source: Bureau of Labor Statistics (BLS).
• The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work. Source: Bureau of Labor Statistics (BLS).
• ⁽⁶⁾ Advance Monthly Sales for Retail and Food Services:Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
• ⁽⁷⁾ Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
• ⁽⁸⁾ The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
• ⁽⁹⁾ The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).

Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO).

⁽¹⁰⁾ Financial Markets – Monthly and YTD returns (Table): Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (JPM EMBI Global), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond), and Developed Markets Sovereign (excl. US) (JPM GBI Global Ex US). Source: Morningstar.

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The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from Amerant Investments, Inc. or any of its affiliates to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

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