The Davy Digest - 25th November 2024

Last week, market volatility following the US election began to ease. The S&P 500, Nasdaq and Stoxx 600 all posted gains for the week. US Treasury yields have remained relatively stable, showing little change from the levels observed just before the US election. Shares in Nvidia dropped 3.7% in pre-market trading after it announced quarterly earnings on Wednesday. Despite beating analyst expectations, investors were disappointed by the slower rate of earnings growth than Q2. Elsewhere in the US, both housing starts and building permits declined in October. The euro fell to its lowest point since 2022 following an unexpected contraction in Eurozone business activity in November. Both manufacturing and services PMIs for the Eurozone came in below expectations. Following Thursday’s market close, traders have significantly increased their expectations for a 50 basis point rate cut by the European Central Bank next month, with the probability rising from 15% to 50%. UK inflation jumped to 2.3%, up from its previous 1.7%, increasing pressure on the Bank of England to delay its next rate cut. Elsewhere, Japanese core CPI came in at 2.3%, above expectations and above the Bank of Japan’s target, supporting a December rate hike.

Last week's highlights

	Housing Starts (19/11) – Declined by 3.1% in October to 1.31 million units, slightly below expectations. Building Permits (19/11) – Fell by 0.6% to 1.42 million units.
	German Producer Price Index (20/11) – Declined by 1.1% in October, heavily influenced by a fall in energy prices. Eurozone HCOB Composite PMI (22/11) – Fell to 48.1 in November vs 50.0 expected.
	UK Inflation (20/11) – Jumped to 2.3% in October year-on-year, above expectations and up from its previous 1.7%.
	Japan Inflation (21/11) – Slowed to 2.3% in October from 2.4%, its lowest level since January but coming in above expectations.

Looking ahead to next week, the minutes of the last Fed meeting will be released on Tuesday, while we will also see data on US inflation and on consumer confidence. Meanwhile in the Eurozone, inflation data will be watched closely ahead of another possible rate cut in December by the European Central Bank. We also look to Germany for inflation and unemployment data. Elsewhere, Japan expects inflation to rise above its 2% target in November.

What's on the radar

	Consumer Confidence (26/11) FOMC Minutes (26/11) US Inflation (Core PCE) (27/11)
	German Inflation (CPI) (28/11) Eurozone Consumer Confidence (28/11) German Unemployment Rate (29/11) Eurozone Inflation (HICP) (29/11)
	BOE's Lombardelli & Dhingra speeches (25/11)
	Australia Inflation (CPI) (27/11) Tokyo Inflation (CPI) (28/11)

Chart of the moment

What if I Invest before a crisis?

Source: Bloomberg, annualised total return through 31/10/2024. Dates used: Black Monday – October 1987, Asian Crisis – October 1997, Dot-Com bubble - March 2000, GFC – July 2007, Covid – February 2020. Returns shown are based on investing before each event and holding until 31/10/2024.

• Even an investor with some of the worst timing possible would achieve reasonable annualised returns on the S&P 500 with a long-term investment horizon. 
• The chart shows annualised total returns from investing in the S&P 500 before each of these events and holding until 31/10/2024.
• Even with exceptionally poor market timing, equities have beaten cash in the long run.