Equity Market Commentary: Global Economic Impact and Analysis

The global economy is experiencing a significant shift, with many countries struggling to recover from the pandemic. The economic impact is being felt across various sectors, including finance and trade.

The World Bank estimates that global trade will decline by 9.2% in 2020, the largest drop since the 2009 financial crisis. This decline is largely due to the pandemic's impact on supply chains and consumer spending.

As the global economy navigates this challenging period, investors are looking for opportunities to grow their portfolios. The S&P 500 index has seen a significant decline in recent months, but some sectors are showing resilience.

The market has been on a wild ride lately, with the S&P 500 index fluctuating between 3,900 and 4,200.

One key trend to note is that the market has been driven by a shift in investor sentiment, with a growing number of investors becoming increasingly optimistic about the economy's prospects.

The yield on the 10-year Treasury note has been steadily increasing, currently standing at 2.5%, which is a significant increase from its historic low of 1.4% in 2020.

This increase in yields has made bonds a less attractive option for investors, causing them to flock to the stock market instead.

The 2024 U.S. presidential race remains too close to call with just days left until November 5.

Several factors could provide key tailwinds for either candidate, including strong economic growth, a resilient labor market, slowing inflation, and a near-record equity market.

Increased geopolitical tensions, particularly in the Middle East, could play to former President Donald Trump's advantage as volatility and oil prices rose in October.

A few thousand voters across a handful of swing states likely will decide the outcome, as they did in 2020.

The Real Clear Politics Betting Average includes various bookmakers, such as BetOnline, Betfair, Bovada, Bwin, Polymarket, PredictIt, and Smarkets.

The outcome of the presidential race will likely be determined by voter turnout, which is made even more unpredictable by hard-to-price social issues.

As of October 1, 2024, the broader NASDAQ Composite Index traded at a next-12-months price-to-earnings (NTM P/E) valuation of approximately 27x.

This represented a 23% premium to the approximate 22x NTM P/E valuation of the S&P 500 Index.

The Nasdaq's NTM P/E valuation of 27x trades at a modest premium to the 25% calendar-year 2025 consensus earnings per share (EPS) growth rate of the NASDAQ Composite Index.

The narrow group of stocks known as the Magnificent Seven have a median NTM P/E of 31x, which is a premium to the Nasdaq Index's NTM P/E of 27x and the S&P 500 Index's NTM P/E of 22x.

We don't view this valuation as egregious, and it's actually down from the peak median NTM P/E valuation of 34x on June 30, 2024.

The stock market can be a wild ride, but understanding its trends and fluctuations can help you make informed investment decisions. According to the Stock Market Today column, the latest stock market news and alerts are available throughout each trading session, helping you stay on top of key market trends.

The Dow Jones Industrial Average, S&P 500, and Nasdaq are just a few of the indices you can track for the latest prices and price changes. The Stock Market Today also provides ongoing analysis of the best stocks to buy and watch.

Here are some key asset classes and their performance over the past few years:

The Stock Market Today also provides a 3-step routine to help you find the best stocks to buy and watch.

The stock market can be a wild ride, but staying on top of the latest news and trends can help you make informed decisions. The Stock Market Today column provides regular updates throughout each trading session, highlighting the latest stock market news and alerting you to any changes in market trend.

You can expect to find ongoing analysis of the best stocks to buy and watch, as well as the latest prices and price changes for major indices like the Nasdaq, S&P 500, and Dow Jones Industrial Average. Tracking stock futures for the Dow Jones, S&P 500, and Nasdaq can also give you a glimpse into what's to come.

Market fluctuations can be a challenge, but understanding the different stages of the market can help you stay on top of the action. The Stock Market Today breaks down the market into three stages: market in uptrend, uptrend under pressure, and market correction. This helps you keep any latest fluctuations in perspective and decide what action to take.

To stay ahead of the curve, bookmark the Stock Market Today page and check The Big Picture after each market close for more detailed analysis and stocks to watch. You can also use the 3-Step Routine to find the best stocks to buy and watch, and see which stocks have been added to or removed from IBD Stock Lists.

The market is influenced by various factors, including central bank decisions, inflation rates, and economic growth. This week, the Federal Reserve policy decision and UK CPI are expected to have a significant impact on the market. Keep an eye on these key events and adjust your strategy accordingly.

Market commentary can also provide valuable insights into the current market conditions. Northwestern Mutual's market commentary, written by experts, simplifies the complexities of stocks, economics, and policy to help you better understand the market.

The pace of adoption of new technologies, such as generative AI, can also impact the market. Historically, markets have often priced in technological advances well in advance of adoption. However, there are also risks associated with the rise of generative AI, including job losses and regulatory challenges.

To make informed investment decisions, it's essential to understand the market backdrop and stay on top of key events. The S&P 500 has been up nearly 30% this year, but there are concerns about sticky services inflation and the potential for a pause in the Fed's rate cuts.

A diversified asset allocation strategy can help smooth out returns over time and promote compounding returns. This is because asset-price returns vary from year to year, but historically, over multiple-year time frames, asset-class performance has tended to smooth.

Here's a summary of the key market indicators:

Remember, past performance is not a reliable indicator of current or future results. It's essential to stay informed and adjust your strategy accordingly to achieve your financial goals.

The Euro-denominated market is a significant player in the global economy, with the Eurozone's GDP making up over 17% of the world's total.

The Euro has been a stable store of value, with an average annual return of 3.5% over the past decade.

Investors have been drawn to the Euro's low inflation rate, averaging 1.3% over the past 5 years.

The Eurozone's current account surplus has been a major contributor to the region's economic stability, with a surplus of 2.5% of GDP in 2020.

The European Central Bank's (ECB) monetary policy has played a crucial role in maintaining the Euro's stability, with the ECB keeping interest rates at historic lows since 2016.

China would likely retaliate against proposed U.S. tariffs, seeking alternative options to sustain its export-led economy.

The presumptive Democratic nominee Harris and former President Trump disagree on details, but directionally, China seems to be where the proposed tariffs would focus.

U.S. multinationals could face retaliation in China and in other countries subject to U.S. tariffs.

We expect this treatment would only accelerate U.S. plans to re-shore or friend-shore.