November Market Insights
Markets snap losing streak and celebrate possible end to rate hikes.
Markets rallied in November. U.S. large-cap stocks (S&P 500) rose 9.13% and small caps (S&P 600) gained 8.27%. The Bloomberg U.S. Aggregate Bond Index, a broad measure of bonds, climbed 4.53%. Emerging-market stocks (MSCI Emerging Markets) rose 8.00%, while developed-market international stocks (MSCI EAFE) gained 9.28%.
Why it happened
Stocks snapped three straight months of declines amid good news on inflation and interest rates, the two main drivers of markets for more than a year.
Mid-month, the Consumer Price Index report showed that inflation continued to moderate. This drove market strength as it raised expectations that the Federal Reserve (the Fed) could end the interest rate hike campaign it had started in 2022 to tame inflation. Good news on inflation gathered steam later in the month with the Personal Consumption Expenditures Price Index, the Fed’s preferred gauge of inflation. The core rate (which excludes energy and food prices) eased to 3.5% year over year. That marks the ninth straight month the figure inched toward the Fed’s 2% target.
Additional economic data in November helped fuel optimism that we might achieve the longed-for soft landing of getting inflation down without causing a recession. While data showed that job creation and consumer spending have cooled, they were still growing.
It’s important to note, however, that despite investor optimism in November, Fed officials themselves continue to make public statements that reflect a wait-and-see approach to interest rates. Consequently, there will remain a level of uncertainty around the Fed’s future rate decisions, which could create market volatility.
What it means for you
November serves as an important reminder that market sentiment and direction can change quickly with new information. It also underscores why it’s important to think twice before changing a long-term portfolio based on short-term market dynamics, which inevitably shift. If you do have questions about your portfolio allocations or if your financial circumstances have changed, please don’t hesitate to reach out to your planner.
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