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Economy & Markets 

  • The latest economic data releases point toward an economy in good shape. An employment market that is slowing very gradually and a consumer spending environment that remains healthy bodes well for 2025. Retail sales rose in November by a higher-than-expected rate of 0.7%, which was driven by purchases of big-ticket durable items such as autos and appliances. 
  • The first measure of small business confidence after the Presidential election showed a dramatic rally to its highest level since June 2021. The National Federation of Independent Business (NFIB) optimism index rose by eight points to 101.7, a level above the 50-year survey average of 98. This increase in confidence should augur well for economic growth next year.

 Equities

  • The S&P 500 performed well in November finishing the month up 5.87%. November results added to robust year-to-date market returns with the S&P 500 higher by approximately 28% through the first 11 months of the year. Expectations for continued strong corporate profit growth remain in place for this year (+9%) and next (+14%).
  • Financials, Communication Services, Technology and Utilities are the top four contributors to the stock market’s 2024 performance. Notably, market breadth has improved since the first half of the year. Growth stocks continue to outperform value, while domestic large cap leads both the mid and small cap groups, with some narrowing of outperformance since the election. 

Fixed Income 

  • The yield curve flattened as the market digested better economic reports and the possibility that the FOMC has a slower path to rate normalization. 
  • Credit spreads tightened, but are still not showing any signs of stress, signaling comfort with the economic outlook.

 Employment

  • The November employment report was much more positive than the soft October report. Hiring bounced back with 227,000 new jobs added for the month.
  • Wages grew by 4.0% over the last year and productivity in the 3rd quarter rose by 2.0%. This means unit labor costs rose by 2.0%, which shows that the underlying labor inflation rate is close to the Fed’s 2.0% target.

Federal Reserve 

  • The Fed cut interest rates by 25 basis points at their December meeting. This is the third cut this year and amounts to a total of 1.0%.
  • Fed Chairman Powell said the economy looks better today than it did in September when it first began cutting interest rates. Investors lowered expectations for rate cuts next year to just two additional 25bp cuts.

Issues to Watch

  • Employment, inflation and the path of further rate cuts, along with policy uncertainty on tax rates, immigration, deregulation efforts and tariffs are all factors we will be closely monitoring for their impact to accelerate or dampen economic activity. President-elect Trump is inheriting an economy in relatively good shape, with a goal to accelerate growth further. The razor thin majority in the House of Representatives and geopolitical events will undoubtedly lead to additional volatility in the new year. 

December Market Outlook

1 Data provided by Bloomberg. Metrics are as of month-end or most recent publication
2 Provided by U.S. Real GDP Economic Forecast Survey Median
3 Provided by World Real GDP Economic Forecast Survey Median
4 Provided by Bloomberg Intelligence Forecast
5 Provided by World Probability Forecast
6 Arrows represent a month-over-month change


December Market Outlook

Asset Allocation / Tactical Positioning

December Market Outlook

1 Equity tactical weights are relative to the Cambridge Trust Core Equity allocation and is comprised of 80% S&P 500 and 20% MSCI AC World ex-U.S. Index.
2 Fixed Income tactical weights are relative to the Cambridge Trust Core Taxable allocation and is comprised of 100% Barclays Intermediate Gov/Credit Index.
3 Below investment grade holdings include high yield and emerging market debt mutual funds. Represents an out-of-benchmark allocation that will be reflected as an overweight position relative to the Barclays Intermediate Gov/Credit Index if any allocation is held.
4 Alternative tactical weights represent an out-of-benchmark allocation that will be reflected as an overweight position when utilized and neutral position when not.
5 Direction arrow highlights any recent changes of the overall allocation after a recent tactical asset allocation or strategy change. Last changes were made at November 2024 Asset Allocation Committee meeting.

Cambridge Trust Wealth Management is a division of Eastern Bank. Views are as of December 2024 and are subject to change based on market conditions and other factors. The opinions expressed herein are those of the author(s), and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, Eastern Bank Wealth Management, Cambridge Trust Wealth Management or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice based on market conditions and other factors. These views and opinions should not be construed as a recommendation for any specific security or sector. This material is for your private information, and we are not soliciting any action based on it. The information in this report has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information. Past performance does not guarantee future performance. Investment Products are not insured by the FDIC or any federal government agency, are not deposits of or guaranteed by any bank, and may lose value.