Monthly Market Update

Jobs Report Signals December Cut

• 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 3%on December 5, up from 3.2% on December 2.
• Employment ⁽³⁾⁽⁵⁾ (November): Total nonfarm payroll employment rose by 227,000 in November, and the unemployment rate changed little at 4.2%, the U.S. Bureau of Labor Statistics reported. The labor force participation rate, at 62.5%, changed little in November and has remained in a narrow range of 62.5% to 62.7% since December 2023. Employment trended up in health care, leisure and hospitality, government, and social assistance. Retail trade lost jobs.
• Inflation ⁽⁴⁾ (October): The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% on a seasonally adjusted basis in October, the same increase as in each of the previous 3 months, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all-items index increased 2.6% before seasonal adjustment. The index for all-items less food and energy rose 0.3% in October, as it did in August and September. The all-items less food and energy index rose 3.3% over the last 12 months.
• The Producer Price Index (PPI) (October): The Producer Price Index for final demand increased 0.2% in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. On an unadjusted basis, the index for final demand moved up 2.4% for the 12 months ended in October.
• Retail and Food Services Sales ⁽⁶⁾ (October): Advance estimates of U.S. retail and food services sales for October 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $718.9 billion, an increase of 0.4% (±0.5%) from the previous month, and up 2.8% (±0.5%) from October 2023.
• Personal Income and PCE ⁽⁹⁾ (October): Personal income increased $147.4 billion (0.6% at a monthly rate) in October, according to estimates released by the U.S. Bureau of Economic Analysis. From the preceding month, the PCE price index for October 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 October increased 2.3%. Food prices increased 1.0% and energy prices decreased 5.9%. Excluding food and energy, the PCE price index increased 2.8% from one year ago.

Fed Signals Gradual Rate Cuts

The last FOMC meeting took place on November 7^th, 2024. The Committee decided to cut federal funds to the target range of 4.50% to 4.75%. As of this writing, markets are pricing in at over a 72% chance of another 25-bps cut at the December 18^th, 2024 meeting. ⁽⁷⁾⁽⁸⁾

Highlights of FOMC Minutes:

• Outlook for Monetary Policy:” Participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2% and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time”.
• Fed See Progress Towards 2% Inflation: “Almost all participants judged that, though month-to-month movements would remain volatile, incoming data generally remained consistent with inflation returning sustainably to 2%”.
• Stability in Core Goods and Services: “Participants commented that disinflationary progress had been seen across a broad range of core goods and services prices. Notably, in both the core goods and nonhousing services categories, prices were now increasing at rates close to those seen during earlier periods of price stability”.
• Fed Debates Neutral Rate Uncertainty: “Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually”.

Monthly and YTD returns

Source: Morningstar asset class screening total return 1 month USD and total return YTD as of December 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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