oXYGen Financial Market Update: 11/01/24

oXYGen Insights

• Election Impact on Markets: BlackRock CEO Larry Fink believes the U.S. election outcome will have minimal long-term effects on financial markets. While Wall Street remains divided, Fink asserts that markets generally stabilize regardless of the winning administration, emphasizing that economic fundamentals are what shape investment outcomes.
• GDP Report: The U.S. economy grew at an annualized rate of 2.8% in the third quarter, slightly below expectations of 3.1%, with consumer spending and federal outlays as the main drivers. Despite resilient growth, inflation remains above target, setting up the Fed for a likely rate cut in early November.
• Record Foreign Treasury Holdings: Foreign holdings of U.S. Treasuries rose to a record $8.5 trillion in August, reflecting steady international demand for U.S. debt. This surge supports U.S. economic stability by maintaining strong demand for government securities, which helps keep borrowing costs manageable amid changing interest rates.

What Else is in the Air

• Rising Global Debt: The IMF projects global public debt to surpass $100 trillion by the end of 2024, driven heavily by deficits in the U.S. and China. This growing debt places fiscal strain on countries worldwide, with poorer nations facing the steepest challenges in balancing spending needs against limited tax revenues and financing constraints.
• Moderating Inflation: The Fed reported steady economic activity and moderating inflation, reinforcing expectations for a 25-basis-point rate cut in November. Businesses remain cautious amid election uncertainties, but easing inflation pressures and declining borrowing costs offer a favorable outlook for continued economic resilience.
• Existing Home Sales Slow: Sales of previously owned homes fell 1% in September, reaching the lowest level since 2010, as high mortgage rates continue to constrain demand. Despite a slight increase in inventory, low supply and a high share of cash purchases have kept prices elevated, with the median home price rising 3% year-over-year.

• Record Early Voting Turnout: Over 46 million Americans have cast their ballots early for the 2024 election, nearly split between in-person and mail-in options. Despite high turnout providing insight into voter enthusiasm, early voting trends are not predictive of final Election Day outcomes, as counting and state-specific rules vary widely.
• Stripe Acquires Bridge: Stripe’s $1.1 billion acquisition of stablecoin platform Bridge underscores the financial sector’s growing shift toward digital and cryptocurrency payments. This positions Stripe at the forefront of digital finance innovation, expanding its reach in crypto as traditional systems increasingly integrate blockchain and digital assets.
• Lithium Project: The Bureau of Land Management approved the Rhyolite Ridge Lithium-Boron mining project in Nevada, a significant step for U.S. critical minerals supply chains. Expected to support the production of nearly 370,000 electric vehicles annually, the project balances environmental protections with job creation, addressing both clean energy goals and local economic growth.

Earnings Spotlight

Alphabet A (GOOGL):

• EPS exceeded expectations by 15.2%, reporting $2.12 vs. $1.84 forecast
• Revenue surpassed forecasts by 2.2%, reporting $88.27B vs. $86.37B forecast.

Microsoft (MSFT):

• EPS surpassed expectations by 6.5%, reporting $3.30 vs. $3.10 forecast
• Revenue exceeded forecasts by 1.6%, reporting $65.6B vs. $64.55B forecast.

Meta (META):

• EPS outperformed predictions by 15.7%, reporting $6.03 vs. $5.21 forecast
• Revenue surpassed expectations by 1.0%, reporting $40.59B vs. $40.18B forecast.

Apple (AAPL):

• EPS exceeded forecasts by 2.5%, reporting $1.64 vs. $1.60 forecast
• Revenue surpassed expectations by 0.5%, reporting $94.9B vs. $94.4B forecast.

Amazon (AMZN):

• EPS surpassed expectations by 25.4%, reporting $1.43 vs. $1.14 forecast
• Revenue exceeded forecasts by 1.0%, reporting $158.9B vs. $157.25B forecast.

Planning Points

Importance of Portfolio Rebalancing:

• Portfolio rebalancing is the act of re-weighting the assets within your investment portfolio to match your desired portfolio composition based on factors such as time-horizon, risk tolerance, and identified investment opportunities.
• As your portfolio evolves over the course of time with different assets earning different returns, the allocation of each asset will start to change from their original weightings.
• For most, rebalancing occurs once a year to match the investors preferred risk tolerance, realize gains from well-performing assets, and invest in new opportunities.
• The effects of not rebalancing your portfolio can be taking on unnecessary risk that does not match your investment goals, which can result in a more volatile portfolio than desired.
• It is important to be aware of taxes that you may realize as a result of rebalancing your portfolio from re-weighting your large wins back to their designated allocation percentage.

Reminder:

• The IRS has recently published tax inflation adjustments for the 2025 tax year. These changes include adjustments to standard deductions, marginal tax rates, and many more key areas. A link to the official IRS release can be found HERE or in the footnotes below!

Summary

In the next two weeks, we will know who the 47th president of the United States will be. Election day is Tuesday, November 5th, and many voters will head to the ballot box with economic issues at the forefront of their minds. Key companies will continue to report earnings, providing a valuable gauge of the economy's health.

Warm regards,

oXYGen Financial Team