In Short

• With 74 national elections held globally in 2024, one key theme emerged: incumbent leaders generally lost or saw their party lose its majority
• November retail reports indicate a consumer focus on value; although Black Friday saw increased online spending, some shoppers may be holding off for better deals later in the season
• Following the election, the “Trump Trade” reemerged, resulting in significant inflows into U.S. large-cap equity funds and strong performance from the S&P 500 and domestic small-cap stocks, as investors expect the president-elect’s pro-growth policies to focus on areas like lower taxes and deregulation
• Despite strong 2024 returns in equity markets, we believe investors should remain vigilant, monitoring policy risks and geopolitical developments, and employing active management to help navigate challenges while reassessing strategic asset allocation targets and evaluating tactical opportunities

Done With the Status Quo

With 74 national elections held through year-end accounting for nearly half the earth’s population, 2024 has been viewed by many as a “global election super-cycle.” This has included turnout by 61% of registered voters and over 1.6 billion votes cast thus far according to the International Institute for Democracy and Electoral Assistance. By year-end, more voters will have gone to the polls in 2024 than in any other year in history. Across thousands of candidates spanning vast distances and cultures, one key theme emerged globally: incumbent leaders generally either lost or saw their party lose its majority.

We believe the takeaway from the super-cycle is that the world’s voters were not happy with the status quo. Even in places where incumbents retained power, they did so with significantly less public support than before. Economic conditions seemed to be a major area of dissatisfaction for voters, even in the United States, where the economic picture could be seen as much rosier than other parts of the world, with U.S. GDP and real wage growth strong and unemployment low. The domestic stock market has fared well, too, with the S&P 500 Index up 28% year-to-date through November. In fact, this run-up is the largest since 1997 for the index. Despite this appreciation, lower-income households have lost confidence as they struggle with higher costs, and auto and credit card delinquencies are on the rise, suggesting perhaps that inflationary pocketbook pressures have mattered more to voters than positive macroeconomic data.

As the dust settled following a Republican sweep of the presidency and Congress, markets turned to other matters ahead of January’s Inauguration Day. Geopolitics came back to the fore midway through the month after Ukraine carried out its first deep attack into Russia using U.S.-made long-range missiles. In the Middle East, Israeli Prime Minister Benjamin Netanyahu announced a ceasefire deal between Israel and Hezbollah, marking the end of more than a year of fighting, and Syrian rebels ousted longtime autocratic President Bashar al-Assad.

On the earnings side, reports from major retailers in November signaled that consumers may be more focused on value and are being cautious about discretionary purchases. Black Friday showed a similar theme, with various reports that consumers increased their budgets, with most of that excess going toward online purchases. For example, Mastercard SpendingPulse data indicated that while overall spending increased 3.4% year-over-year on Black Friday, in-store sales grew by only 0.7%, with online sales up 14.6%. Admittedly, there is speculation that consumers may be waiting for even more aggressive sales promotions as the holiday shopping season progresses.

Although the odds already favored Trump ahead of his November 5 victory, investors, based on their money flows, went “risk-on” following his strong showing. U.S. large-cap equity funds saw record inflows of over $44 billion in the week following the election. This rotation into growth and away from more stable assets, like cash, is likely an acknowledgement of a shift in investor conviction: higher U.S. growth and higher inflation under an administration that will focus on lower taxes, tariff policy, deregulation and reshoring. Simply put, the “Trump trade” reemerged strongly. As a result of these shifts, the S&P 500 passed the 6,000 mark (returning 5.9% for the month, its largest monthly increase of the year), and U.S. small-cap stocks rose 11%. On the sector level, financials, industrials and energy stocks outperformed on the back of potential deregulation. International stocks struggled as the U.S. dollar strengthened. Finally, as a further sign of growth momentum, Bitcoin broke $100,000 at the beginning of December. Many refer to momentum driven by investor optimism as “animal spirits,” which turned into a commonly repeated phrase during the month to describe strong returns for riskier assets that could potentially persist through year-end.

While the immediate post-election period may favor risky assets, our longer-term outlook is optimistic as well. A new year under a new regime during a central bank easing cycle will likely produce a new economic landscape. All things considered, we believe investors should monitor the balance of policy risks as well as any additional geopolitical developments, with diversification across asset classes (style and size) helping to mitigate potential downside risk. Active management may also become increasingly important as managers are able to navigate risks in a tactical manner. As 2024 concludes, we believe it may be a good time to review long-term strategic asset allocations and to determine if any tactical adjustments are warranted, especially following two years of 20%+ returns for the S&P 500.

Portfolio Implications

Equities were higher during the month domestically, led by small-cap stocks, while emerging market stocks struggled the most against headwinds from a strengthened U.S. dollar. We maintain an at-target overall view across equities with an overweight to small caps, as we anticipate further broadening of equity-market performance given an expected economic environment of higher growth with lower inflation. Small-cap stocks could also see high levels of earnings growth in 2025 (40%+ year-over-year).

Renewed stimulus from China has improved the outlook for non-U.S. markets, but we believe the country’s structural challenges will likely weigh on the global economy. Meanwhile, we believe that non-U.S. stocks could benefit from higher global growth and lower commodity prices, although tariffs may hinder certain regions. A stronger U.S. dollar could potentially be a headwind for emerging markets, but outside the U.S., a lot depends on the trajectory of trade policy, capital flows, energy prices and geopolitical flashpoints. At a high level, we favor lower-beta, higher-quality names, and favor employing active management to select companies with high earnings visibility.

Fixed Income was positive during the month, led by longer-dated bonds even as yields generally moved lower. We downgraded our view on investment grade fixed income given full valuations and our soft-landing outlook, and debt sustainability concerns make us cautious on longer-dated bonds, even as policy rates are cut. Going into 2025, following over two years of bond markets being dominated by inflation data and the responses of central banks, we believe that the growth outlook will likely become the focus for bonds. Since we expect that a reacceleration of inflation can be avoided next year, central banks are likely to settle into a routine of debating the level of the elusive “neutral rate.”

In a challenging fundraising, exit and financing environment for Private Markets, we believe significant opportunities exist within the asset class for firms and strategies that can act as liquidity and solutions providers to help close the capital supply/demand gap and support value-added transactions. This backdrop, along with Neuberger Berman’s deep relationships and unique position within the private equity ecosystem, has translated into record levels of deal flows across our platform. We continue to see potentially compelling opportunities in secondaries, co-investments, private credit and capital solutions. We are also becoming more constructive on core private real estate, while we see abundant market-dislocation opportunities in the value-add and opportunistic sectors and, particularly, in real estate secondaries. Finally, we anticipate a reacceleration of mergers, acquisitions and IPOs, which we view as a pent-up area of corporate dealmaking.

Please refer to our Solving for 2025 for more detailed information on NB Private Wealth’s outlook for the new year.

Index Returns as of November 2024

Source: Bloomberg, total returns as of November 30, 2024. S&P 500 Index is represented by S&P 500 Total Return Index. Nasdaq Composite NASDAQ-Composite Total Return Index. Dow Jones is represented by Dow Jones Industrial Average TR. Large Cap is represented by Russell 1000 Total Return Index. Mid Cap is represented by Russell Midcap Index Total Return. Small Cap is represented by Russell 2000 Total Return Index. All Cap is represented by Russell 3000 Total Return Index. Large Cap Growth is represented by Russell 1000 Growth Total Return. Large Cap Value is represented by Russell 1000 Value Index Total Return. Small Cap Growth is represented by Russell 2000 Growth Total Return. Small Cap Value is represented by Russell 2000 Value Total Return. ACWI is represented by MSCI ACWI Net Total Return USD Index. ACWI ex US is represented by MSCI ACWI ex USA Net Total Return USD Index. DM Non-U.S. Equities is represented by MSCI Daily TR Gross EAFE USD. EM Equities is represented by MSCI Daily TR Gross EM USD. Cash is represented by ICE BofA US 3-Month Treasury Bill Index. U.S. Aggregate is represented by Bloomberg US Agg Total Return Value Unhedged USD. Munis is represented by Bloomberg Municipal Bond Index Total Return Index Value Unhedged USD. Munis Short Duration is represented by Bloomberg Municipal Bond: Muni Short (1-5) Total Return Unhedged USD. Munis Intermediate Duration is represented by Bloomberg Municipal Bond: Muni Intermediate (5-10) TR Unhedged USD. Investment Grade is represented by Bloomberg US Corporate Total Return Value Unhedged USD. High Yield is represented by Bloomberg US High Yield BB/B 2% Issuer Cap Total Return Index Value Unhedged USD. Short Duration is represented by Bloomberg US Agg 1-3 Year Total Return Value Unhedged USD. Long Duration is represented by Bloomberg US Agg 10+ Year Total Return Value Unhedged USD. Global Aggregate is represented by Bloomberg Global-Aggregate Total Return Index Value Unhedged USD. EMD Corporates is represented by J.P. Morgan Corporate EMBI Diversified Composite Index Level. EMD Sovereigns – USD is represented by J.P. Morgan EMBI Global Diversified Composite. Commodities is represented by Bloomberg Commodity Index Total Return. Commodities ex Energy is represented by Bloomberg Ex-Energy Subindex Total Return. U.S. 10-Year Yield is represented by US Generic Govt 10 Yr.