Monthly Market Update – November 2023

By Simmons Investment Advisors on December 1, 2023

Access PDF Here

Headlines From Last Month:

• Q3 Earnings quarter is wrapping up with generally better-than-expected results.
• Government shutdown was avoided as an agreement was made, funding the federal
  government through early next year.
• The Israel-Gaza War:
  • The war entered its second month in early November.
  • Truces have been happening where Israeli hostages have been exchanged for aid, a cease-fire, and the release of Hamas Members.
• The historic United Auto Workers strike (which began on September 15th) against the
  Big Three auto makers, ended as union members voted to accept all three deals:
  • The 4-year contracts (set to expire in 2028) include the biggest wage increases
    in decades, on top of cost-of-living adjustments.
  • Raises in the range of 25% will add significant costs for the auto companies.
• Oil Prices continued to fall, down -6.25% in November, at a 4-month low after hitting a 12-month peak September. Oil is down -19.1% from that September 27th high.
• Gold has rallied this year due to the geopolitical tensions:
  • Year-to-date, it’s up 13.05%.
  • Most of that move came from the October 5th level, up 10.57% since then.
• The Federal Reserve:
  • Left their target rate unchanged following their meeting on November 1st.
  • Chairman Powell declined to give any indication that the FOMC was finished raising rates but did suggest that higher rates have tightened financial conditions.
  • This was the 2nd consecutive meeting where they left rates unchanged.
  • Minutes from the meeting indicated that FOMC members believe it’s appropriate to leave rates at a restrictive level until inflation is clearly moving lower to their target.
  • Analysts now believe that the FOMC is done raising rates, following the key inflation data below, and are now focused on the timing and pace of rate cuts.
  • Their next meeting is December 13th.
• Economic Data:
  • Employment/Unemployment:
    • US nonfarm payrolls increased by 150K vs the expected 170K, a sharp decline from September’s increase of 297K.
    • The unemployment rate rose from 3.8% to 3.9% vs the expectation for no change.
  • Inflation:
    • Consumer Price Index:
      • CPI increased 3.2% (less than the expected increase of 3.7%) and was flat compared to the previous month (expected to rise by 0.1%), led by lower energy prices ⁽ⁱ⁾.
      • Core CPI (excludes food and energy costs) rose 0.2% from the prior month and 4.0% year over year, versus expectations for increases of 0.3% and 4.1% ⁽ⁱ⁾.
    • Producer Price Index:
      • PPI fell by -0.5% (the biggest monthly drop since April 2020), well below the expected increase of 0.1% ⁽ⁱ⁾.
    • PCE (Personal-Consumption Expenditures Index) rose 0.2%, and up 3.5% on a year-over-year basis, both in-line with estimates ⁽ⁱ⁾.
  • Retail Sales fell -0.1% in October (i) (after rising 0.7% in Sept and 0.6% in August), compared to estimates for a decline of -0.3%. Year-over-year, sales rose 2.5% ⁽ⁱ⁾.
  • 3rd quarter GDP (Gross Domestic Product) was revised up from 4.9% to 5.2%, versus the expected upward revision to 5.0% ⁽ⁱ⁾.

US Equities:

• Stocks rallied sharply in November on optimism that the Fed is done raising interest rates following optimism around cooling inflation, with the Dow finishing the month at a 2023 high.

• Historically (going back to 1945), November is a strong month with an average gain of 1.47% and positive returns two-thirds of the time (v). Combined with December, stocks have finished positive 75% of the time, with an average gain of 3.0% ^(v).
• Recent economic data and 3rd quarter earnings has sent a positive message to the markets.
• Growth vs. Value for November:
  • Growth (Russell 1000 Growth Index) rallied 10.78% while Value (Russell 1000 Value Index) gained 7.24% ^(iv).
  • Year-to-date, Growth is up 35.46% while Value is up 3.33% ^(iv).
• The S&P 500 is now up 27.70% since the Oct ‘22 low, the Dow is up 25.19% from its Sept ’22 low, and the Nasdaq is up 39.29% from its Dec ’22 low.
• From their recent lows (late October ’23), the S&P is up 11.28%, the Dow 11.13% and the Nasdaq 13.35%.
• The S&P 500 is 5.01% from its all-time high, set back in late 2021, the Dow is 1.99% from its peak, and the Nasdaq is 11.40% from its high.

• Monthly performance, calculated on a price return basis:
  • Dow rose 8.77%
  • S&P 500 gained 8.92%
  • Nasdaq rallied 10.70%
• Year to date performance, also calculated on a price return basis:
  • Dow is up 8.46%
  • S&P 500 is up 18.97%
  • Nasdaq is up 35.92%

US Fixed Income:

• US Treasury yields dropped sharply in November.
• The 10-year US Treasury finished November at 4.34%, well off the October 19th level of 4.98%, its highest level since 2007 ⁽ⁱⁱⁱ⁾.
• On November 10th, Moody’s cut the outlook on the US government from stable to negative but maintained its top rating of Aaa on US credit ^(vi).
• The rate on 30-year mortgages has declined over the past 5-6 weeks after peaking above 8.25%. The average is now around 7.65%, which is still much higher than a year ago when it was at 6.75% ⁽ⁱⁱ⁾.

• Yields on US Treasuries dropped from October month-end levels:
  • 1 year – 5.12% ^(iv)
  • 2 year – 4.70% ^(iv)
  • 10 year – 4.34% ^(iv)

• As a point of reference, at October month-end, yields were at:
  • 1 year – 5.43% ^(iv)
  • 2 year – 5.06% ^(iv)
  • 10 year – 4.90% ^(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).