November comes through to push the S&P500 to the yearly high!
It sure was an incredible month with the S&P500 up 8.9% and the US Aggregate Bond Index up over 3%. We even officially vacated the correction that we were in after hitting highs in July. There was so much news regarding interest rates, economic stability, earnings and forecasts. All of it boiled down to some fairly good news.
So with all of the information coming out, let’s condense it into a few major points.
The Fed – Yes, everyone is tired of wondering what the Federal Reserve is going to do with interest rates. Heck, even the Fed officials can’t agree on the next steps. How are we supposed to grab tiny bits of info from their meetings? It usually happens when the Fed Chair speaks to the press afterwards. With a tiny change in wording, the markets were fairly happy over the last month. Basically, market investors are extremely optimistic that, not only is the Fed done raising interest rates, but that they will start cutting them next year. This means that some of our current run-up in the markets is already priced into those rate cuts. If the Fed ends up raising rates again, we’ll see a decent pullback. A lot of it depends on what the Fed sees in the gauge they look at. A few weeks ago, core inflation numbers rose at the slowest pace in about two years. Let’s hope the Fed is correct in assuming they can bring in a soft landing for our economy.
Earnings – Boy, oh boy, it would be wonderful to get back to simply watching corporate earnings. It looks like we are extremely close to normalizing that news cycle again. When the news is about company efficiencies, bottom lines, headcount, growth projections, etc, the market volatility should lower quite a bit. This can lead to a steady upward path that we were all accustomed to for many quarters/years.
Bonds – If you are an investor that is not in the highest, aggressive risk tolerance, then you have some bonds in your portfolio. Over the last couple of years, they have performed extremely poor. This relates to the first point on the Fed. However, if the Fed takes a backseat finally, you might just see a rapid uptick in bonds. Just like we saw in November, once the bond traders see that the Fed is out of the way, the market recovers extremely fast. With one of the worst bond markets we’ve ever seen hitting us in 2022 then lingering into this year, I think there’s a chance we could see an outstanding comeback in 2024/2025.
I hope you have a very Merry Christmas. Have a wonderful new year. Try not to party too hard or sleep too long. Watch out for those random ice patches. Keep an eye on good things.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risks, including the loss of principal.