As we enter December, things are looking rosy for the markets going into year-end. Thanks to growing confidence that the Federal Reserve is done raising interest rates for 2023 and may cut rates earlier than expected in 2024, the Dow Jones Industrial Average, NASDAQ, and S&P 500 all had their best month of the year in November.
The release of the personal consumption expenditures (PCE) pricing index for October also raised optimism that the Fed will hold interest rates through the end of the year. The PCE index was 3.0% year-over-year in October, lower than the 3.4% increase in September. It’s the smallest year-over-year gain since March 2021. Why is the PCE price index important? It's one of the primary measures of inflation and consumer spending in the U.S., measuring changes in household cost of living and how much the typical household spends each month.
Good news may be on the horizon for potential homebuyers and existing homeowners. After 30-year fixed mortgage rates peaked briefly at 8% in October - a 20-year high - they fell sharply this past month. If housing market demands and the inflation rate continue to decline, we may see more reasonable mortgage rates, leading to more affordable housing and refinancing opportunities.
December is National Identity Theft Prevention and Awareness Month. Identity theft is one of the fastest growing crimes, and with the distraction of the holidays, it’s easy to fall victim to identity theft scams. Here are some tips to help keep your information and accounts safe from fraudsters:
We wish you a joyful holiday season and a happy New Year!
Turkey was not the only thing investors were thankful for in November. All three major equity indices in the U.S. (the Dow Jones, NASDAQ, and S&P 500) were up over 9% for the month. The rally, which kicked off with a drop in bond yields, led to one of the best Novembers on record for the market. Consistent with much of the year, large technology-focused companies led the start of the rally, although as the month progressed, other market sectors saw positive earnings as well. With another rate hike by the Fed not expected this cycle, stock prices rose through November.
Only one sector, Energy, posted monthly losses in November. The losses in the Energy sector were driven by a continued slide in oil prices, which fell 2.58% on the month, closing at $82.83. Although OPEC+ announced an additional production cut on the final day of the month, oil prices remained largely unchanged. The star sector of the month was Technology, as has been for most of the year. A combination of positive earnings surprises and the potential for a lower interest rate environment helped the Tech sector deliver a more than 12% return on the month. In addition to mega-cap tech names -- such as Microsoft -- that have performed well all year, previously downtrodden sectors (like Financials and Real Estate) posted large gains on the month (both sectors turning positive for the year).
Bonds rose in lockstep with equities in November. Softer than anticipated inflation data and indications from the Fed that rate hikes may end, led to a drop in bond yields, with the 10-year falling 60 bps to 4.33% in November. Because yields move inversely with prices, bonds rallied, with longer duration bonds performing exceptionally well. The U.S. Bloomberg Aggregate Bond Index turned positive this month, opening the possibility that bonds will avoid their third consecutive negative year of returns. The Fed will meet one last time this year, during the second week of December, to decide the path of interest rates.
November was characterized by strong but softening economic data, which supports the market consensus of a “soft landing” where inflation falls without a steep decline in economic activity or growth. The labor market added jobs for its 34th straight month, though the number, measured by nonfarm payrolls, only increased by 150,000 (which was below the consensus view). The unemployment rate moved up slightly to 3.9%, though it's still considered low on an absolute basis. All three inflation measures -- CPI, PPI, and PCE -- increased at a slower rate than the previous month. In each of the readings, their month-over-month print was either unchanged or fell, signaling a move in the right direction for prices, which have remained high until recently. The second iteration of third quarter GDP was also released in November, coming in higher than expected at an annualized rate of 5.2%, surpassing expectations of 5.0%. Although 1.4 percentage points of the gain came from an excess supply of inventory, the number still bodes well for economic growth.
South Korean Student Inventors Receive Dyson Award
Inspired by the difficulties while treating the 55,000+ casualties from the February 2023 Turkish-Syrian earthquakes, a team of South Korean college students designed an IV bag that doesn’t require gravity or electricity. Their “Golden Capsule” is a non-powered, hands-free device that uses elastic forces and air pressure to administer the IV, meaning medics in disaster zones no longer must hold up IV packs while transporting patients, and electricity isn’t required to control the infusion.
One of the students experienced first-hand the complications of the conventional IV bag methodology when she was recently hospitalized. She found it very inconvenient to move around with the IV, which gave her an idea of the need for a better way to administer IVs.
Their Golden Capsule invention received the 2023 James Dyson Award, which is part of an international design competition that celebrates, encourages, and inspires the next generation of design engineers. To read more about this exciting new invention and view a video about all the award winners, click here.
THOUGHT FOR THE MONTH
Dow Jones Industrial Average: The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.
Dow Jones U.S. Real Estate Total Return Index: The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.
NASDAQ Composite: The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.
S&P 500 Bond Index: The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.
S&P 500 Consumer Discretionary: The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.
S&P 500 Consumer Staples: The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.
S&P 500 Energy: The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.
S&P 500 Financials: The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.
S&P 500 Index: The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.
S&P 500 Utilities: The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.
S&P U.S. Aggregate Bond Index: The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.
S&P U.S. Treasury Bond Index: The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.
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Your Monthly Market Newsletter, December 2023
December 06, 2023|