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Your Monthly Market Newsletter, December 2023

Your Monthly Market Newsletter, December 2023

| December 06, 2023

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:

  • Exercise caution when shopping online by making purchases from legitimate sellers. If a deal is too good to be true, it’s likely to be a scam.
  • Review your financial accounts regularly to make sure you don’t have any charges you didn’t make. Turn on fraud alerts for your bank and credit accounts so you’ll know about any unusual activity immediately.
  • When reviewing your financial accounts or shopping online, avoid using public wi-fi, which is likely to be unsecure.
  • Don’t reuse your passwords across your online accounts. To help you store your passwords safely, consider using a password manager app.
  • Make sure your charitable donations are going to a reputable organization. CharityNavigator.org is a great resource to verify an organization before submitting a donation.


Navigating the financial landscape can sometimes feel like a journey into the unknown. If you need more information about these tips or how they play a part in your overall financial plan, give us a call – we’d be happy to help. If you’ve been considering making changes to your financial plan or have questions about your current strategy, let’s schedule a meeting.

We wish you a joyful holiday season and a happy New Year!

Stocks

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.

Sector Performance

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

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.

Economic Update

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.

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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

Index Definitions

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.

Disclosures 

PLEASE NOTE: When you link to any of the websites displayed within this email, you are leaving this email and assume total responsibility and risk for your use of the website you are linking to. We make no representation as to the completeness or accuracy of any information provided at these websites.

A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results. 

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.

The statements provided herein are based solely on the opinions of the Osaic Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Osaic or its affiliates.

Certain information may be based on information received from sources the Osaic Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Osaic Research Team only as of the date of this document and are subject to change without notice. Osaic has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Osaic is not soliciting or recommending any action based on any information in this document.