A Strong November

I hope everyone had a great Thanksgiving with their friends and family. A strong November was followed by a mixed week to begin the final month of the year. The major averages saw the S&P 500 gain 58 points or .96%, the NASDAQ advanced 642 points or 3.34% while the DOW lost 268 points or .6%. Leaving the major averages on track for another very good year after a strong November.

Solid Jobs Report

A strong November BLS employment report added a better than expected 227,000 new jobs. September and October were revised up by 56,000 combined. As a result, we have a 47th consecutive month of job gains. The unemployment rate increased slightly to 4.2%, average hours increased by .1. Average earnings gained .4% for the month and 4% from a year ago. A decent report despite significant influence from the Boeing strike ending. In addition, the effects of the hurricanes that hit Florida recently mitigating. Nonetheless job openings continue to shrink and disappoint. As shown by the graph, Thanks to Mish.

Job Openings Compared to Employment Mid 2024

With the Fed poised to cut interest rates again this month the debate over how many times next year rages. More than a few pundits got well ahead of themselves. Leading to dashed expectations and a considerable dialing back with respect to the number of cuts in 2025. Current yields by type are illustrated by the graph below.

Current Income Yields by Type Q-3 2024

Despite continuing concerns about equity valuations. The combination of decent economic data and lower interest rates. Along with a Republican administration in 2025 should provide a significant tailwind for stocks next year. As shown in the chart below.

A History Lesson

With the mainstream media continuing to portray the incoming administration in a poor light. The battle between the DC status quo, desperately in need of substantial reform, and Trump 2.0 is likely to define the USA for years to come. It has often been said inside the beltway. The best way to get less of something is to deny it funding. With respect to the budget, the Constitution forbids the president from spending more money than Congress has appropriated. However, there’s nothing in the Constitution that forbids the president from spending less. Which brings me to the Impoundment Control Act of 1974. Originally created to stop Nixon from impounding or withholding funds. As a result, we also got the CBO, House and Senate budget committees. Sending budget control to Congress and ending a nearly 200-year period of executive impoundment. So, what happened, you ask? A picture is worth a 1,000 words. Debt as a percentage of GDP exploded. Thanks to the Office of Management and Budget for the chart.

After 1974, significant annual deficits became the norm. From 1947 to 1974, the federal deficit averaged 0.4% of GDP. Since 1974, deficits have averaged 3.8% of GDP. They’ve been close to 6% for President Joe Biden’s entire time in office. (Negative numbers represent a surplus.) The nation’s debt, on a downward trend after World War II. Stopped declining in 1974 and started rising, dramatically. As shown in the chart below. Thanks again to the Office of Management and Budget.

Let’s hope Trump 2.0 challenges the Impoundment Control Act as unconstitutional. As letting Congress have budget control has proven a fiscal disaster.

That’s all for this week folks, I’ll see you again next Friday.

Best, Caleb

Last Week’s Post: Recession, what recession?

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