Monthly Review - November 2024
- 03 December 2024 (5 min read)
The markets
5.7%
-1.6%
-2.5%
-0.5%
2.9%
-0.3%
-2.2%
0.3%
-0.5%
Source: Bloomberg 30.11.2024, returns in local currency
Top stories
Trump bump
Donald Trump will be the 47th President of the United States. A clean sweep for his Republican Party delivered a strong mandate for policies like tax cuts, deregulation and trade tariffs. He announced ‘Day One’ tariffs on Mexico, Canada and China, unless they block the flow of illegal drugs and migrants. US equity markets rediscovered their animal spirits in the weeks following the election. Tesla led the charge, as founder Elon Musk was appointed to run the newly created Department of Government Efficiency or DOGE. The price of Musk’s cryptocurrency Dogecoin bounced, while Bitcoin, which started the month below $70,000, surged towards $100,000.
Fed staying the course
The US Federal Reserve (Fed) pledged to continue its path of careful, patient easing. And the Fed is “not in a hurry to lower rates”, according to Chair Powell, given a prosperous US economy and the “bumpy” downward path of inflation. Markets took this on board and the odds of a December rate cut fell back towards 50:50. As US companies brace for increased trade protectionism and potentially higher wage costs, inflation is unlikely to go quietly. Nonetheless, the data dependent Fed will avoid acting ahead of Trump policy changes. ‘High for longer’ looks set to be the new Fed mantra.
Hot chips
Nvidia announced strong Q3 results, with revenues almost double last year’s level. But the share price dipped, as the rate of growth hit the slowest pace for three quarters. The new Blackwell microchip for AI data processing is in hot demand from Big Tech, with hyperscalers like Microsoft, Google and Meta “racing” to bring it to the market. This tallies with their own chunky capex plans, although investors remain keen to understand when this outlay will yield returns. Meanwhile, Amazon plans to double its investment in Anthropic, the generative AI start up, even as regulators look to increase their scrutiny of Big Tech’s AI deals.
Climate deal agreed
The COP29 summit in Baku proved controversial. After lengthy debate, developed nations pledged $300bn by 2035 to help developing countries tackle the impacts of climate change. This fell well short of what was deemed to be required, prompting comments that the agreement was a “travesty of justice”. Elsewhere, German power producer RWE is scaling back its investments in green energy projects following Donald Trump’s victory, on fears that the president-elect might (once again) pull the US out of the 2015 Paris Climate Agreement. And oil giant Shell won an appeal against a case that would have forced the company to slash its carbon emissions.
On the radar
After Donald Trump picked hedge fund manager Scott Bessent as his Treasury Secretary, hopes will grow for some mitigation of the president-elect’s threats of a blanket hike in trade tariffs. The threat could be used as a bargaining chip to help ease US dollar strength, rather than as a longer term policy.
US Treasury bond markets will continue to reflect concerns over Trump’s promises to cut taxes, hike tariffs and forcibly eject millions of illegal immigrants. Inflation data will be closely watched, as these policies could stoke demand, as well as raising prices and wages.
Geopolitical tensions could mount further, after the Biden administration lifted restrictions on Ukraine’s use of US made long-range missiles to strike targets in Russia. Meanwhile, the resilience of ceasefire deals in the Middle East could be tested.