U.S. Treasury yields fell, stock markets rose, and the dollar weakened. Crude oil dropped over 4%, gold fell 1.63%, while Bitcoin gained 3.90%.

U.S. Treasury bond yields saw a notable decline across the yield curve this week, with a decrease of around 21 basis points. The entire curve is now trading at lower yields post-election, with the long end leading the move. The spread between the German 10-year bond and the U.S. 10-year bond has widened to over 200 basis points.

U.S. stock markets closed the week on a positive note, with Wall Street experiencing broad-based gains. Micro-cap stocks led the charge, rising 1.98%, followed by small-cap stocks, which gained 1.30%. In contrast, large-cap stocks saw a more modest increase of 1.06%. The "Magnificent 7" stocks collectively rose by 1.39%.

The U.S. dollar weakened against the euro, dropping to 0.947303. Crude oil (WTI) prices fell by more than 4%, as concerns over supply risks from the Israel-Hezbollah conflict eased, coupled with expectations of increased supply in 2025. Despite this, OPEC+ is expected to maintain its production cuts. Gold prices declined by 1.63%, retreating after strong gains the previous week. Cryptocurrencies, however, remained strong, with Bitcoin gaining 3.90% over the week.

Q3 GDP growth steady. Consumer spending, exports, and business investment rise. Inflation persists. Housing weakens. Corporate profits up. Consumer confidence increases, aided by labour market strength.

Third-quarter GDP growth held steady at 2.8%, driven by robust consumer spending (up 3.5%), along with gains in exports, federal spending, and business investment, which offset declines in housing investment and inventories. Corporate profits grew 6.1% YoY, reflecting economic resilience and strengthening the outlook for a "soft landing." Inflation pressures persisted, with the GDP price index rising 1.9% and core PCE increasing 2.1% YoY. October’s PCE inflation rose 0.2% MoM (2.3% YoY), while core PCE climbed 0.3% MoM (2.8% YoY), dampening the chances of a December rate cut. In housing, new home sales dropped 17% due to higher mortgage rates and weather disruptions, although pending sales rose 5.4%. Builders remain competitive, with a housing market recovery expected by mid-2025, highlighting steady economic performance amid ongoing challenges. Meanwhile, consumer confidence surged to a two-year high in November, buoyed by strong labour market conditions and diminishing recession fears.

Third-quarter GDP growth remained at 2.8%, driven by strong consumer spending, with steady economic performance, resilient corporate profits, and a positive outlook for a "soft landing."

The second estimate of third-quarter GDP was revised to 2.8%, unchanged from the initial report, reflecting steady economic growth driven largely by consumer spending, which increased by 3.5%, slightly below the expected 3.7% but the highest rate this year. The slowdown from the second quarter was mainly attributed to declines in inventories and housing investment, though gains in exports, federal spending and business investment helped offset these losses. The GDP price index rose 1.9%, surpassing expectations, while core personal consumption expenditures (PCE) increased by 2.1%, slightly below forecasts. Corporate profits also showed resilience, growing 6.1% YoY in Q3, further demonstrating the economy's strength despite challenges. These data underline the resilience of the American economy, making it increasingly clear that Jerome Powell is on track for his anticipated 'soft landing.'

The US economy shows resilience, and with the Christmas season approaching, we expect consumer spending to rise, which could boost corporate profits and sustain growth through the end of the year.

October's US PCE inflation rose 0.2% MoM, 2.3% YoY, with core PCE up 0.3% MoM, 2.8% YoY, lowering rate cut expectations.

The October US PCE inflation report, the Federal Reserve's preferred gauge, showed a 0.2% MoM increase in headline PCE and a 2.3% YoY rise. Core PCE, which excludes food and energy, rose 0.3% MoM and 2.8% YoY, marking the highest increase since April. The main drivers of this rise were services, particularly housing. Supercore inflation, which measures core services excluding housing, advanced 0.4% MoM and 3.5% YoY, reflecting ongoing wage-driven inflationary pressures. Meanwhile, goods prices fell by 0.1%, food prices were unchanged, and energy prices decreased by 0.1%. The 12-month annualized rate for headline PCE increased to 2.3%, up from 2.1% in September. The 6-month annualized rate declined to 1.6%, the lowest in four years, while the 3-month rate rose to 2.2%. Core PCE's 6-month annualized rate remained at 2.3%, while the 3-month core rate increased to 2.8%, and the 12-month core rate rose to 2.8%, up from 2.7% in September. As a result, market expectations for a December rate cut fell to 60%, down from 75% a month earlier, as elevated core inflation suggests that the Fed may delay policy easing if inflationary pressures persist.

The rise in inflation, coupled with policies will be implemented by Trump starting in January, may lead the Fed to refrain from cutting rates in December. We anticipate that these inflationary increases will be a regular occurrence throughout the coming year, largely driven by Trump’s policies, particularly in trade.

New home sales dropped in October due to rising mortgage rates and weather disruptions, while pending sales increased 5.4%.

New home sales in October dropped to 610k units, the lowest level since November 2022 and well below expectations of 725k. This marks a 17% decline from the previous month and a 9% decrease from the same period last year. The months of supply increased to 9.5 months, the highest since 2022, with regional variations observed across the U.S. The South experienced the sharpest decline in new home sales, falling by 28%, while the West saw a 9% decrease. In contrast, the Northeast and Midwest saw month-over-month increases. The downturn in sales can be attributed to a combination of weather disruptions, such as hurricanes, and the October rise in mortgage rates, which put additional pressure on demand. Despite these challenges, new home inventory has risen, with new single-family home inventory up 2% from September and 8% YoY.

Pending home sales, however, showed a positive trend, rising for the third consecutive month in October and increasing 5.4% compared to the previous year. This growth came despite the ongoing challenge of higher mortgage rates, supported by increased inventory and a resilient labour market. While higher inventory has provided some relief to buyers, affordability remains a significant barrier, as higher rates continue to limit purchasing power. Mortgage applications in November have slightly decreased, indicating that the market is still grappling with these challenges. However, new home builders, unlike existing homeowners, are not rate-locked, which gives them an advantage over the resale market, allowing them to offer incentives to entice buyers.

We maintain our outlook that the housing market may begin to recover in Q1 or Q2 of 2025. We expect new home sales to outperform the existing home market in the near term, driven by the lock-in effect on current homeowners.

November’s Consumer Confidence Index rose to 111.7, driven by labour market optimism, declining inflation expectations, reduced recession fears, and increased stock market confidence despite cautious spending.

The Conference Board Consumer Confidence Index rose to 111.7 in November, driven by labour market optimism, with the Present Situation Index increasing 4.8 points to 140.9 and the Expectations Index ticking up to 92.3, well above recession signalling thresholds. Younger consumers and middle-income groups led confidence gains, while top and bottom income brackets saw declines. Inflation expectations fell to a 4-year low of 4.9%, and recession fears dropped to their lowest since mid-2022. Stock market optimism reached record highs, though purchasing plans for homes stalled, and durable goods spending remained cautious. Consumers prioritized lower prices, saving more, and reducing debt for 2025, reflecting ongoing concerns about elevated costs despite moderated inflation. The improving sentiment underscores economic resilience, with continued optimism about labour markets and financial prospects heading into 2025.

We maintain our view that consumer confidence will continue improving through year-end, though we anticipate a modest rise in long-term inflation expectations in the coming months.