Newsletter

NEWS

What Happened Last Week

France’s government, led by Prime Minister Michel Barnier for only three months, was ousted Wednesday by a vote of no confidence. President Macron faces the need to appoint a new Prime Minister.

South Korea’s President briefly declared martial law on Tuesday, claiming that a refusal to vote on the 2025 budget made them vulnerable to attack from North Korea. This extremely unpopular move caused the legislature to make a motion to impeach the following day.

The US PMI Composite, which weighs the proportion of companies which report positive vs negative growth in activity, demand, and supply chains, came in at the highest number in the last three months: 54.9.

European PMI Composites were less encouraging, overall indicating decline.

The US added 227,000 jobs in November, beating expectations while also being well ahead of October’s meager report that was dampened by hurricanes and job strikes.

Investor sentiment remains cautiously optimistic, ranging between neutral and slightly bullish, according to the AAII Investor Sentiment Survey and Fear and Greed Index.

How I See It

Europe’s numbers aren’t looking great, exacerbated by what’s going on in France.

On the other hand, America appears to be pulling through and showing improvement. Even broad-based improvement across the economy!

But of course, in a global world, international trade matters. What happens to one part of the world affects the rest. So will America’s momentum be able to materially impact global growth, or will it encounter resistance due to falling external demand?

The Federal Reserve considers an extensive array of factors when making decisions. But up until now, to me they’ve seemed too eager to reduce interest rates in the midst of a healthy US economy.

After seeing November’s numbers, I think I know at least one reason why.

In a global economy that was more or less experiencing positive growth indicators, I do believe it would make sense for the Fed to hold interest rates higher for longer.

But in the current state of less than exciting news across the world, it might make sense to give America a greater boost in economic strength to counteract the potential friction down the road.

That said, the numbers above don’t tell the whole story. PMIs only weigh and translate the proportion of companies that reported growth vs decline, but do not consider the magnitude of either. So theoretically, we could still see positive healthy growth even with PMIs below 50. That would mean the health of the fewer growing companies outweighed the decline in the larger number that struggled. Not ideal economically, but also not entirely bad for markets.

When all is said and done, I think investors are optimistic but not unreasonably so, and that bodes well for future growth.

I still believe we may be headed for a market correction sometime next year, but not one which is extensive enough to lead to a bear market. Overall, I expect 2025 to be a double-digit year by the end.