November Market Recap
Everybody loves a comeback.
Following three consecutive months of losses, the Dow Jones and S&P 500 gained nearly 9% in November. The NASDAQ performed even better as accelerating bond yields finally reversed course and investors made up their minds that Fed hikes are over.
The result was the best month for US equities since July 2022. In doing so, stocks quickly erased the losses from their August-October selloff and regained the positive momentum that has defined the 2023 narrative.
Ten of the 11 equity sectors in the S&P 500 delivered gains last month. Technology (+12.7%) and Real Estate (+12.3%) led the pack. Energy (-1.7%) was the worst-performing sector for the second month in a row. Energy had been the strongest sector in July, August, and September.
Benchmark Returns: November 2023 | YTD 2023
+8.77% | +8.46%
+8.92% | +18.97%
+10.70% | +35.92%
November was strong from the start. The S&P 500 increased all five trading days during the week ending November 3, the first time that has happened in two years (Nov. 2021). The winning streak eventually reached eight days on November 8, another feat that had not occurred since 2021.
And significantly, those gains were broad-based. Small-cap stocks, which have lagged most of the year, began pulling their weight. The Russell 2000 index climbed 7.6% in that first week and otherwise kept pace with its larger-cap cousins, rising 8.8% last month.
On November 9, Federal Reserve Chair Jerome Powell attempted to pour cold water on rally by stating, “We are not confident we’ve achieved a sufficiently restrictive (policy) stance.” A one-day selloff ensued, but the equity market soon shrugged off Powell’s hawkish rhetoric. Futures suggest a 90%+ probability of “no rate hike” following the next Fed meeting on December 13.
It’s no coincidence the sharp rebound in stocks coincided with the reversal of what had been rapidly rising bond yields. Ten-year US Treasury yields rose from 4% in late August to nearly 5% in late October as a resilient economy and stubborn inflation led investors to believe “higher (rates) for longer” were inevitable.
That outlook no longer represents the consensus. In the last five weeks, bond yields have fallen just as fast, spurred on by favorable inflation reports. The latest Consumer Price Index (CPI) released November 14 showed 3.2% inflation from a year ago (down from 3.7% a month earlier).
CPI was expected to drop because of falling oil prices, but this still qualified as “better than expected.” The Personal Consumption Expenditures (PCE) report released November 30 showed 3% inflation from a year ago, in line with consensus expectations. Excluding food and energy prices, the number was 3.5%.
By the time November ended, 10-year Treasury yields had fallen to 4.35%.
With third-quarter corporate earnings season in the books, the blended annual earnings growth for S&P 500 companies was 4.8%. That blows away the 0.3% earnings decline that was forecasted as of September 30. 82% of the companies reporting beat consensus expectations.
With stocks moving steadily higher last month, so too did valuations. The forward P/E ratio of the S&P 500 ended November at 18.7. That’s up from a low near 17 in late October.
West Texas Intermediate Crude oil trades just above $74 per barrel, down from $80 per barrel a month ago and -22% from its late September peak.
Gold prices increased 2.5% in November.
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Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.