Monthly Market Update – December 2023

By Simmons Investment Advisors on January 1, 2024

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Headlines from Last Month:

• The Federal Reserve:
  • Left their target rate unchanged following their meeting on December 13th.
  • This was the 3rd consecutive meeting where they left rates unchanged.
  • The FOMC signaled that there may be multiple interest rate cuts in 2024.
  • Their next meeting is at the end of January.
• The Israel-Gaza War:
  • The war entered its third month.
  • Attacks on container ships in the Red Sea/Suez Canal by Yemen’s Houthi militants forced multiple shipping companies to take a longer route around Africa
• Oil Prices continued to move lower, down -6.1% in December, at a 5-month low after hitting a 12-month peak in September. Oil is down -23.85% from that September 27th high.
• Gold has rallied this year due to the geopolitical tensions:
  • For 2023, it’s gained 13.57%.
  • Most of that move came from the October 5th level, up 13.35% since then.
• Economic Data:
  • Employment/Unemployment:
    • US nonfarm payrolls increased by 199K vs the expected 175K.
    • Unemployment declined to 3.7%, vs the expectation to remain at 3.9%.
  • Inflation:
    • Consumer Price Index:
      • CPI increased 3.1% (as expected) and was up 0.1% compared to the previous month (expected to be unchanged) ⁽ⁱ⁾.
      • Core CPI (excludes food and energy costs) rose 0.3% from the prior month and 4.0% year over year, both numbers in-line with estimates ⁽ⁱ⁾.
    • Producer Price Index:
      • PPI was unchanged for the month, less than the estimate for a gain of 0.1%, up 0.9% on a year-over-year basis ⁽ⁱ⁾.
    • Personal-Consumption Expenditures Index:
      • PCE declined -0.1% vs the expectation for no change (the first monthly decline since April 2020) and rose 2.6% on an annualized basis (the smallest gain since February 2021) ⁽ⁱ⁾.
      • Core PCE (excludes food and energy) rose 0.1% (vs an anticipated rise of 0.2%), up 3.2% on a year-over-year basis, below the expected 3.3% ⁽ⁱ⁾.
  • Retail Sales rose 0.3% in November vs. expectations for a decline of -0.1%. Year-over-year, sales rose 4.1% (i).

US Equities:

• Stocks continued their rally from the October 27th low on continued optimism that the
  Fed will begin to cut rates in 2024.
• The rally included a 9-day positive close streak for the Dow and Nasdaq, the longest
  winning streak since 2017.
• The Dow set an all-time high on December 28th. The S&P 500 came within 9 points of
  its high and the Nasdaq is 6.50% from its all-time peak.
• The S&P 500 has now rallied 33.35% since the Oct ‘22 low, the Dow is up by 31.25%
  from its Sept ’22 low, and the Nasdaq has jumped 46.98% from its Dec ’22 low.
• From their recent lows (late October ’23), the S&P is up 16.20%, the Dow 16.51% and the
  Nasdaq 19.60%.
• Growth vs. Value:
  • o Growth (Russell 1000 Growth Index) rose 4.38% while Value (Russell 1000 Value Index) gained 5.33% ^(iv).
  • For the year, Growth rallied 41.4% while Value rose 8.84% ^(iv).
• Small-cap stocks (Russell 2000 Index) did well in 2023, gaining 15.09%, most of which coming since the late summer. More stocks participating in the rally is a good sign moving forward.
• Monthly performance, calculated on a price return basis:
  • Dow rose 4.84%
  • S&P 500 gained 4.42%
  • Nasdaq rallied 5.52%
• Year-to-date performance, also calculated on a price return basis:
  • Dow rose13.70%
  • S&P was up 24.32%
  • Nasdaq jumped 43.42%

US Fixed Income:

• US Treasury yields continued lower last month.
• The 10-year US Treasury finished December at 3.88%, well off the October 19th level of 4.98%, its highest level since 2007 ⁽ⁱⁱⁱ⁾.
• The rate on 30-year mortgages has declined over the past couple of months after posting above 8.25%. The average is now around 6.95%, which is still higher than a year ago when it was at 6.75% ⁽ⁱⁱ⁾.

• Yields on US Treasuries dropped from November levels:
  • 1 year – 4.80% ^(iv)
  • 2 year – 4.23% ^(iv)
  • 10 year – 3.88 ^(iv)
• As a point of reference, at November month-end, yields were at:
  • 1 year – 5.12% ^(iv)
  • 2 year – 4.70% ^(iv)
  • 10 year – 4.34% ^(iv)

Regards,

Mike & Steve

DISCLOSURE: All data is as of previous month-end (October 31, 2023). Sources include www.cnbc.com (i), https://www.cnn.com/business (ii), https://finance.yahoo.com (iii), other public websites, Hightower Advisors, LLC (iv), FactSet (v), and Barron’s (vi).