This week, the U.S. stock market navigated through a landscape marked by both political and economic shifts. Following a decisive U.S. election and subsequent burst of optimism, the atmosphere cooled a little this week as investors began the arduous task of trying to figure out what a second Trump term will mean for both the economy and the stock market. The big question is to what extent coming policies such as tax cuts and deregulation will spur growth and to what extent they will escalate debt and inflation.
This week, the U.S. economic data unveiled some insightful trends beginning with the October Consumer Price Index (CPI), which showed a slight increase of 0.2% taking the 12-month inflation rate up to 2.6% which was in line with expectations. Energy costs, which had been declining in recent months, were flat in October while the food index increased 0.2%. On a year-over-year basis, energy was off 4.9% while food was up 2.1%. Despite signs of inflation moderating elsewhere, shelter prices continued to be a major contributor to the CPI movement. The shelter index, which carries a one-third weight in the broader index, climbed another 0.4% in October. Over the last year, core CPI rose by 3.3%, also meeting expectations and indicating that inflation is somewhat stabilizing.
Retail sales in October exhibited resilience with a modest surge, growing by 0.4% month-over-month. This jump surpassed economists’ forecasts and was primarily driven by robust consumer spending in areas such as electronic goods, restaurants, and automotive purchases. The positive report reflects consumer confidence and spending capacity, despite inflationary pressures, hinting at a robust underlying economy as we approach the holiday shopping season. This also prompted investors to pare back expectations that the Federal Reserve would cut interest rates in December. Fed Chair Jerome Powell said on Thursday “the economy is not sending any signals that we need to be in a hurry to lower rates.”In the world of corporate earnings, Home Depot revealed a solid quarter, with sales climbing by 6.6% y/y and profit margins improving due to effective cost management and strong demand for improvement products, especially due to hurricane demand. While proposed tariffs could have some impact on earnings, the company was quick to note that it sources over half of its products in North America.
Disney’s earnings announcement highlighted impressive figures from its theme park division, which saw a notable profit increase thanks to high visitor numbers and successful overseas operations. This success overshadowed some challenges faced in the streaming segment, where growth competition remains fierce. Take this news as a signal that consumers are still spending.
In closing, I want to talk about cryptocurrency. No, not Bitcoin. It’s one you most likely have never heard of before. This coin was introduced in 2013 as a joke, making fun of the wild speculation in cryptocurrencies at the time. It is widely considered the first “meme” coin. Despite intending to be a joke, the coin features the face of Kabosu from the doge meme as its logo and namesake. By 2021, it had reached a market cap of $85 billion. While having pulled back some, Dogecoin is currently more valuable than the Ford Motor Company. As a favorite of Elon Musk, dogecoin is not only a speculative “investment” but now the acronym being used for the newly formed Department of Government Efficiency. You can’t make this stuff up. Now you know.
P.S. There are only 40 days left until Christmas!