Raphael Stevens

Federal Reserve officials expressed confidence that inflation is easing and the labor market is strong, allowing for further interest rate cuts albeit at a gradual pace, according to minutes from the November meeting released Tuesday.
The meeting summary contained multiple statements indicating that officials are comfortable with the pace of inflation, even though by most measures it remains above the Fed’s 2% goal.

With that in mind, and with conviction that the jobs picture is still fairly solid, Federal Open Market Committee members indicated that further rate cuts likely will happen, though they did not specify when and to what degree.
“In discussing the outlook for monetary policy, participants anticipated that if the data came in aboutas expected, with inflation continuing to move down sustainably to 2 percent and the economyremaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time,” the minutes said.
The FOMC voted unanimously at the meeting to take down its benchmark borrowing rate by a quarter percentage point to a target range of 4.5%-4.75%. Markets expect the Fed could cut again in December, though conviction has waned among concerns that President-elect Donald Trump’s plans for tariffs could stoke inflation higher.
The meeting concluded two days after the contentious presidential election campaign resulted in the Republican emerging as the victor and set to begin serving his second term in January.There was no mention of the election in the minutes, save for a staff notation that stock market volatility rose before the Nov. 5 results and fell after. There also was no discussion of the implications of fiscal policy, despite anticipation that Trump’s plans, which also include lower taxes and aggressive deregulation, could have substantial economic impacts.
However, members did note a general level of uncertainty about how conditions are evolving. In addition, they expressed uncertainty over where the rate cuts would need to stop before the Fed hit a “neutral” interest rate that neither boosts nor restrains growth.

“Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually,” the minutes said.
Conflicting signals on inflation and the uncertainty over Trump’s policies have caused traders to scale back their outlook for interest rate cuts ahead. The market-implied probability of a rate trim in December has drifted below 60%, with an expectation of just three-quarters of a percentage point in reductions through the end of the 2025.
Committee members appeared to spend much of the meeting talking about progress on inflation and a generally stable economic outlook.
Policymakers in recent days have expressed confidence that current inflation readings are being boosted by shelter cost increases that are expected to slow as the pace of rent rises eases and makes its way through the data.
“Almost all participants judged that, though month-to-month movements would remain volatile, incoming data generally remained consistent with inflation returning sustainably to 2 percent,” the document said.”Participants cited various factors likely to put continuing downward pressure on inflation, including waning business pricing power, the Committee’s still-restrictive monetary policy stance, and well-anchored longer-term inflation expectations,” it added.
Policymakers had been expressing concern about the labor market. Nonfarm payrolls rose only 12,000 in October, though the meager gain has been attributed primarily to storms in the Southeast and labor strikes.
Officials indicated that the state of the labor market is generally solid.
“Participants generally noted … that there was no sign of rapid deterioration in labor market conditions, with layoffs remaining low,” the minutes said.

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FA Playbook

President-elect Donald Trump’s policy agenda, from tariffs to deregulation, carries risks and rewards for different investment sectors, market experts said.
Here are the big factors that may impact autos, banks, building materials and construction, crypto, energy, health care, retail, and technology.

President-elect Donald Trump at a viewing of a test-flight launch of the SpaceX Starship rocket in Brownsville, Texas, Nov. 19, 2024.
Brandon Bell | Getty Images News | Getty Images

As Inauguration Day nears, investors are trying to unravel what booms or busts lay ahead under President-elect Donald Trump.
Trump’s campaign promises — from tariffs to mass deportations, tax cuts and deregulation — and his picks to lead federal agencies suggest both risks and rewards for various investment sectors, according to market experts.  

Republican control of both chambers of Congress may grant Trump greater leeway to enact his pledges, experts said. However, their scope and timing is far from clear.

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Here’s a look at other stories impacting the financial advisor business.

“There’s so much uncertainty right now,” said Jeremy Goldberg, a certified financial planner, portfolio manager and research analyst at Professional Advisory Services, which ranked No. 37 on CNBC’s annual Financial Advisor 100 list.
“I wouldn’t be making large bets one way or another,” Goldberg said.

Sectors often fare differently than expected

Past market results show why it’s difficult to predict the sectors that may win or lose under a new president, according to Larry Adam, chief investment officer at Raymond James.
When Trump was elected in 2016, financials, industrials and energy outperformed the S&P 500 in the first week. However, for the remaining three years and 51 weeks, those same sectors significantly underperformed, Adam said.

“The market is known to have these knee-jerk reactions trying to anticipate where things go very quickly, but they don’t necessarily last,” Adam said.

What’s more, sectors that are expected to do well or badly based on a president’s policies have sometimes gone the opposite way, according to Adam.
For example, the energy sector was down by 8.4% during Trump’s first administration, despite deregulation, record oil production and a rise in oil prices. Yet the energy sector climbed 22.9% under Biden as of Nov. 19, despite the administration’s push for renewables and sustainability.
For that reason, Raymond James ranks politics eighth for its potential impact on sectors. The seven factors that have more influence, according to the firm, are economic growth, fundamentals, monetary policy, interest rates and inflation, valuations, sentiment and corporate activity.
Here’s how Trump’s policy stances could influence eight sectors: autos, banks, building materials and construction, cryptocurrency, energy, health care, retail and technology.

Automobiles

Monty Rakusen | Digitalvision | Getty Images

The auto sector — like many others — will likely be a mixed bag, experts said.
Trump’s antipathy for electric vehicles is likely to create headwinds for EV producers.
His administration may try to roll back regulations such as a Biden-era tailpipe-emissions rule expected to push broader adoption of EVs and hybrids. He also intends to kill consumer EV tax credits worth up to $7,500 — although states such as California may try to enact their own EV rebates, blunting the impact.
Losing the federal credit would make EVs more costly, driving down sales and perhaps making “per unit economics even less favorable” for automakers, John Murphy, a research analyst at Bank of America Securities, wrote in a Nov. 21 research note.
Some companies seem well-positioned, though: Ford Motor, for example, “has a healthy pipeline of hybrid vehicles as well as traditional [internal combustion engine] vehicles to supplement the EV offerings,” Murphy wrote.

Tariffs and trade conflict pose threats to the auto industry, since the U.S. relies heavily on other nations to manufacture cars and parts, said Callie Cox, chief market strategist at Ritholtz Wealth Management.
They “could affect the cost and availability of cars we see in the U.S. market,” Cox said.
Economists expect tariffs and other Trump policies to be inflationary.
In that case, the Federal Reserve may have to keep interest rates higher for longer than anticipated. Higher borrowing costs may weigh on consumers’ desire or ability to buy cars, Cox said.
However, lower EV production could be a boon for companies that manufacture traditional gasoline cars, experts said.
Trump has also called for a “drill, baby, drill” approach to oil production. Greater supply could reduce gas prices, supporting demand for gas vehicles, experts said. But trade wars and sanctions on Iran and Venezuela could have the opposite impact, too.
— Greg Iacurci

Banks

President Donald Trump stands next to JPMorgan Chase CEO Jamie Dimon, left, in the State Dining Room of the White House in Washington, Feb. 3, 2017.
Andrew Harrer | Bloomberg | Getty Images

Trump’s first administration eased certain regulations for banking rules, fintech firms and financial startups.
Likewise, Trump’s second term is expected to usher in lighter financial regulations.
That may help bolster profitability in the sector, and therefore stock prices, said Brian Spinelli, co-chief investment officer at Halbert Hargrove in Long Beach, California, which is No. 54 on the 2024 CNBC FA 100 list.
“The larger banks probably benefit more from that,” Spinelli said.
Less regulation — combined with the prospect that interest rates could stay higher — will provide a net positive for the bank industry, since banks may be able to lend out more risk-based capital, said David Rea, president of Salem Investment Counselors in Winston-Salem, North Carolina, which is No. 8 on the 2024 CNBC FA 100 list.
One issue that emerged this year that could resurface is concern about regional banks’ exposure to commercial real estate, Spinelli said.
“It wasn’t that long ago, and I don’t think those problems disappeared,” Spinelli said. “So you question, is that still looming out there?”
— Lorie Konish

Building materials and construction

Bill Varie | The Image Bank | Getty Images

The housing market has been “frozen” in recent years by high mortgage rates, said Cox, of Ritholtz.
Lower rates would likely be a “catalyst” for housing and associated companies, she said.
However, that may not materialize — quickly, at least — under Trump, she said. If policies such as tariffs, tax cuts and mass deportations stoke inflation, the Federal Reserve may have to keep interest rates higher for longer than anticipated, which would likely prop up mortgage rates and weigh on housing and related sectors, she said.
The whims of the housing market affect retailers, too: Home goods stores may not fare well if people aren’t buying, renovating and decorating new homes, Cox said.

That said, deregulation could be “absolutely huge” for the sector if it accelerates building timelines and reduces costs for developers, Goldberg said.
Trump has called for opening public land to builders and creating tax incentives for homebuyers, without providing much detail.
Housing policy will be “one of the most-watched initiatives coming out of the next administration,” Cox said. “We haven’t gotten a lot of clarity on that front.”
“If we see realistic and well-thought-out policies, you could see real estate stocks and related stocks” such as real estate investment trusts, home improvement retailers and home builders respond well, Cox said.
— Greg Iacurci

Crypto

Republican presidential nominee and former U.S. President Donald Trump gestures at the Bitcoin 2024 event in Nashville, Tennessee, U.S., July 27, 2024.
Kevin Wurm | Reuters

Trump’s election has brought a new bullishness to cryptocurrencies, with bitcoin nearing a new $100,000 benchmark before its recent runup ended.
As president, Trump is expected to embrace crypto more than any of his predecessors.
Notably, he has already launched a crypto platform, World Liberty Financial, that will encourage the use of digital coins.
Those developments come as new ways of investing in crypto have emerged this year, with the January launch of spot bitcoin ETFs, and more recently, the addition of bitcoin ETF options.
Yet financial advisors are hesitant, with only about 2.6% recommending crypto to their clients, an April survey from Cerulli Associates found. Roughly 12.1% said they would be willing to use it or discuss it based on the client’s preference. Still, 58.9% of advisors said they do not expect to ever use cryptocurrency with clients.
“The No. 1 reason why advisors aren’t investing in cryptocurrency on behalf of their clients is they don’t believe it’s suitable for client portfolios,” said Matt Apkarian, associate director in Cerulli’s product development practice.

Even for advisors who do expect they may use crypto at some point, it’s “wait and see,” particularly regarding how the regulatory environment plays out, Apkarian said.
However, investors are showing interest in cryptocurrency, with 90% of advisors receiving questions on the subject, according to research from Christina Lynn, a certified financial planner and practice management consultant at Mariner Wealth Advisors.
For those investors, exchange-traded funds are a good starting place, Lynn said, since there’s less chance of falling victim to one of crypto’s pitfalls such as scams or losing the keys, the unique alphanumeric codes attached to the investments. Because crypto can be more volatile, it’s best not to invest any money you expect you’ll need to pay for near-term goals, she said.
Investors would also be wise to think of cryptocurrency like an alternative investment and limit the allocation to 1% to 5% of their overall portfolio, Lynn said.
“You don’t need to have a lot of this to have it go a long way,” Lynn said.
— Lorie Konish

Energy

President Donald Trump gestures after delivering a speech at a Double Eagle Energy Holdings LLC oil rig in Midland, Texas, July 29, 2020.
Cooper Neill | Bloomberg | Getty Images

As of Nov. 19, energy has been the top-performing sector under President Joe Biden, with a 22.9% gain, even with the administration’s push for renewables and sustainability, according to Raymond James.
Yet it remains to be seen whether that performance can continue under Trump, who has advocated for more oil, gas and coal production. The outlook for the sector could change if Trump acts on a campaign threat to repeal the Inflation Reduction Act, a law enacted under Biden that includes clean energy incentives.
If Trump continues to make it easier to create more oil supply, that might not be a great thing for oil companies, according to Adam, of Raymond James.
“Because there’s more supply, it may tamp down on the price of oil, and that’s one of the biggest drivers of that sector,” Adam said.
Eagle Global Advisors, a Houston-based investment management firm that specializes in energy infrastructure, is “cautiously optimistic” about Trump’s impact on the sector, according to portfolio manager Mike Cerasoli. Eagle Global Advisors is No. 35 on the 2024 CNBC FA 100 list.
“We would say we’re probably more on the optimistic side than the cautious side,” Cerasoli said. “But if we know anything about Trump it’s that he’s a wild card.”

A lot of the Inflation Reduction Act may stay intact, since the top states that benefited financially from the law also handed Trump a victory in the election, according to Cerasoli.
When Biden won in 2020, there was a lot of panic about the outlook for energy, oil and gas. Cerasoli recalls writing in a third-quarter letter that year, “I don’t think it’s going to be as bad as you think.”
Four years later, he has the same message for investors on the outlook for renewables. In the days following Trump’s inauguration, Cerasoli expects there may be a deluge of executive orders.
“Once you get past that, you’ll get a sense of exactly how he’s going to treat energy,” Cerasoli said. “I think people will realize that it’s not the end of the world for renewables.”
— Lorie Konish

Health care

Medicine vials on a production line.
Comezora | Moment | Getty Images

Trump nominated Robert F. Kennedy Jr. as head of the Department of Health and Human Services.
RFK would be a “huge wild card” for the health-care sector if the U.S. Senate were to confirm him, said Goldberg, of Professional Advisory Services.
RFK is a prominent vaccine skeptic, which may bode ill for big vaccine makers such as Merck, Pfizer and Moderna, said David Weinstein, a portfolio manager and senior vice president at Dana Investment Advisors, No. 4 on CNBC’s annual FA 100 ranking.
Cuts to Medicaid and the Affordable Care Act, also known as Obamacare, are also likely on the table to reduce government spending and raise money for a tax-cut package, experts said.
Publicly traded health companies such as Centene, HCA Healthcare and UnitedHealth might be affected by lower volumes of Medicaid patients or consumers who face higher health-care premiums after losing ACA subsidies, for example, Weinstein said.

Robert F. Kennedy Jr. during the UFC 309 event at Madison Square Garden in New York City, Nov. 16, 2024.
Chris Unger | Ufc | Getty Images

Medical tech providers — especially those that supply electronics with semiconductors sourced from China — could be burdened by tariffs, he added.
Conversely, deregulation might help certain pharmaceutical companies such as Thermo Fisher Scientific and Charles River Laboratories, which may benefit from faster approvals from the Food and Drug Administration, Goldberg said.
Vivek Ramaswamy, a former biotech executive whom Trump appointed as co-head of a new advisory panel called the “Department of Government Efficiency,” has called for streamlined drug approvals. But Kennedy has advocated for more oversight.
“There’s a real dichotomy here,” Weinstein said.
“Where do we end up? Maybe where we are right now,” he added.
— Greg Iacurci

Retail

Thomas Barwick | Digitalvision | Getty Images

Tax cuts may boost consumers’ discretionary income, which would be a boon for companies selling consumer electronics, clothes, luxury goods and other items, Goldberg said.
Then again, there’s a “high probability” of tariffs, Weinstein said.
Retailers would likely pass on at least some of that additional cost to consumers, experts said.
All physical goods, from apparel to footwear, tools and appliances are at risk from tariffs, Weinstein said. Tariff impact would depend on how the policies are structured.
Home Depot, Lowe’s and Walmart, for example, source a relatively big chunk of their goods from abroad, Weinstein said.

Home Depot CEO and President Ted Decker said Nov. 12 during the firm’s third-quarter earnings call that the company sources more than half its goods from the U.S. and North America, but “there certainly will be an impact.”
“Whatever happens in tariffs will be an industrywide impact,” Decker said. “It won’t discriminate against different retailers and distributors who are importing goods.”
It’s a good idea for investors to own “high quality” retailers without a lot of debt and with diversified inventory sources, Goldberg said. He cited TJX Companies, which owns stores including TJ Maxx, Marshalls and HomeGoods, as an example.
“Direct imports are a small portion of [its] business and TJX sources from a variety of countries outside of China,” Lorraine Hutchinson, a Bank of America Securities research analyst, wrote in a Nov. 21 note.
Deregulation may be positive for smaller retailers and franchises, which tend to be more sensitive to labor laws and environmental and compliance costs, Goldberg said.
— Greg Iacurci

Technology

Former President Donald J. Trump speaks about filing class-action lawsuits targeting Facebook, Google and Twitter and their CEOs, escalating his long-running battle with the companies following their suspensions of his social media accounts, during a press conference at the Trump National Golf Club in Bedminster, New Jersey, July 07, 2021.
Jabin Botsford | The Washington Post | Getty Images

The technology sector continued its strong run in 2024, thanks in large part to the Magnificent Seven — Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia and Tesla.
Even broadly diversified investors may find it difficult to escape those names, as they are among the top weighted companies in the S&P 500 index.
Information technology — which includes all those stocks except Amazon and Google parent Alphabet — comprises the largest sector in the S&P 500 index, with more than 31%.
Trump is poised to have an influence on looming antitrust issues, amid considerations as to whether Google’s influence on online search should be limited.
Any tariffs put in place may also prompt some sales to decline or the cost of raw materials to go up, said Rea of Salem Investment Counselors.
Nevertheless, Rea said his firm continues to have a “pretty heavy” tech allocation, with strong expectations for generative artificial intelligence. However, the firm does not own Tesla, due to its expensive valuation, and has recently been selling software company Palantir, a winning stock that may have gotten ahead of itself, he said.
Technology valuations are trading well into the high double digits on a price-to-earnings basis, which often signals forward returns will decline, according to Halbert Hargrove’s Spinelli.
Consequently, prospective investors who come in now would basically be buying high, he said.
“If you think you’re going to get the same double-digit returns in the next five years, sure, it could happen on a one-year basis,” Spinelli said. “But your chances historically have been that your returns come down.”
— Lorie Konish More

Donald Trump has fired the first shot. Goods arriving in America from Canada and Mexico will meet tariffs of 25% as soon as he returns to the White House, the president-elect announced on November 25th. Mr Trump also said that he would impose additional 10% tariffs on Chinese goods. With two months to go before his inauguration, the promise is rippling through financial markets. Mr Trump is not wasting any time in seeking to exert America’s influence. More