Global Markets Rise in December

Stock markets in the U.S. and around the world continued advancing in December, hitting new high water-marks and breaking decades-old records.

For the month of December:

  • The DJIA leapt 4.8%;
  • The S&P 500 jumped 4.4%;
  • NASDAQ advanced 5.5%; and
  • The Russell 2000 gained 12.0%.

There were a lot of milestones to cheer, but the one that is garnering a lot of attention is that the final trading week of the month (and year) was the 9th  consecutive winning streak for the S&P 500, DJIA and NASDAQ – something that hasn’t happened in unison since 1985. And this rally has been very strong: since the streak started on October 30th, NASDAQ is up about 17% and the S&P 500 and DJIA are up about 15%. And the Russell 2000 – which did post a losing week since October 30th – is up a staggering 23%.

In keeping with U.S. markets, performance in developed markets outside the U.S. in November was fantastic too – as all 38 developed markets tracked by MSCI were positive – exactly as occurred in November. Performance in the emerging markets tracked by MSCI was very good too, with 44 of those 46 indices advancing in December, although generally speaking, performance in the developed, international markets was better versus the performance in emerging markets.

The themes that drove market performance in November continued to center around decent corporate earnings, signs of cooling inflation, an accommodative Fed, and an improving labor market.

Volatility, as measured by the VIX, trended down slightly in December, beginning the month under 13 and ending the month slightly lower, with a modest increase late in the month.

West Texas Intermediate crude also trended down this month, losing about $5/barrel to end the month at $71.33/barrel.

Market Performance Around the World

Investors looking outside the U.S. saw great performance, as all 38 of the developed markets tracked by MSCI advanced this month – with the majority advancing between 4 – 5%. Performance for emerging markets was just almost as solid, with 44 of the 46 indices moving up for the month – and the two that declined were down less than 1%.

Sector Performance Almost All Positive

For the month of December, sector performance was almost entirely positive, with 10 of the11 advancing and 6 of those jumping by more than 5%. Incidentally, December’s sector performance was almost exactly like November’s, as November saw 10 advance too, with only Energy once again in the red, albeit modestly.

Contrast that with October, when 10 were negative as only the Utilities sector squeaked out a modest gain of about 1%. And the two months before October were very different from both November and December as the months of September and August only saw the Energy sector positive.

Finally, for December, the range in sector-returns was decently wide relative to previous months, with Real Estate up almost 10% and Energy down about 1%.

Here are the sector returns for the month of December and November (two very short time-periods):

GDP Rises More Than Expected

Late in the month, the Bureau of Economic Analysis reported that real gross domestic product (GDP) increased an annual rate of 4.9% in the third quarter of 2023 according to its “third” estimate. In the second quarter, real GDP increased 2.1%.

The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, residential fixed investment, and nonresidential fixed investment. Imports increased.

Compared to the second quarter, the acceleration in real GDP in the third quarter primarily reflected an upturn in exports and accelerations in consumer spending and private inventory investment that were partly offset by a deceleration in nonresidential fixed investment. Imports turned up.

·        Current‑dollar GDP increased 8.3% at an annual rate, or $547.1 billion, in the third quarter to a level of $27.61 trillion, a downward revision of $34.3 billion from the previous estimate.

·        The price index for gross domestic purchases increased 2.9% in the third quarter.

·        The personal consumption expenditures price index increased 2.6%, a downward revision of 0.2 percentage point. Excluding food and energy prices, the PCE price index increased 2.0%, a downward revision of 0.3 percentage point.

Personal Income

Current-dollar personal income increased $196.2 billion in the third quarter. The increase in the third quarter primarily reflected increases in compensation (led by private wages and salaries), nonfarm proprietors’ income, and personal interest income that were partly offset by a decrease in personal current transfer receipts.

Disposable personal income increased $143.5 billion, or 2.9%, in the third quarter. Real disposable personal income increased 0.3%.

Personal saving was $851.2 billion in the third quarter, an upward revision of $35.9 billion from the previous estimate. The personal saving rate – personal saving as a percentage of disposable personal income – was 4.2% t in the third quarter.

House Prices Rise 6.3% Over the Year

The Federal Housing Finance Agency reported that U.S. house prices rose in October, up 0.3% from September. House prices rose 6.3% from October 2022 to October 2023. The previously reported 0.6% price increase in September was revised to a 0.7% increase.

For the nine census divisions, seasonally adjusted monthly price changes from September 2023 to October 2023 ranged from -0.3 percent in the New England division to +1.1 percent in the Middle Atlantic division. The 12-month changes ranged from +2.6 percent in the Mountain division to +9.9 percent in the Middle Atlantic division.

“U.S. house price gains remained strong over the last 12 months.” said Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA’s Division of Research and Statistics. “On a monthly basis, price appreciation moderated in October, with four divisions exhibiting slowdowns from the previous month.”

Single-Family US Housing Starts Leap 18.0% in November

The U.S. Census Bureau reported that privately-owned housing starts leapt 14.8% in November to 1.56 million units while single-family housing starts surged 18.0% in November. In addition, it was reported that building permits declined 2.5% and housing completions rose 5.0%.

Building Permits

Privately‐owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,460,000.

  • This is 2.5% below the revised October rate of 1,498,000.
  • This is 4.1% above the November 2022 rate of 1,402,000.

Single‐family authorizations in November were at a rate of 976,000

  • This is 0.7% above the revised October figure of 969,000.
  • Authorizations of units in buildings with five units or more were at a rate of 435,000 in November.

Housing Starts

Privately‐owned housing starts in November were at a seasonally adjusted annual rate of 1,560,000.

  • This is 14.8% above the revised October estimate of 1,359,000.
  • This is 9.3% above the November 2022 rate of 1,427,000.

Single‐family housing starts in November were at a rate of 1,143,000.

  • This is 18.0% above the revised October figure of 969,000.
  • The November rate for units in buildings with five units or more was 404,000.

Housing Completions

Privately‐owned housing completions in November were at a seasonally adjusted annual rate of 1,447,000.

  • This is 5.0% above the revised October estimate of 1,378,000.
  • This is 6.2% below the November 2022 rate of 1,543,000.

Single‐family housing completions in November were at a rate of 960,000.

  • This is 3.2% below the revised October rate of 992,000.
  • The November rate for units in buildings with five units or more was 472,000.

Number of U.S. Job Openings Fell to 8.7 Million, Fewest Since March 2021

The number of job openings decreased to 8.7 million on the last business day of October, the U.S. Bureau of Labor Statistics reported. Over the month, the number of hires and total separations changed little at 5.9 million and 5.6 million, respectively. Within separations, quits (3.6 million) and layoffs and discharges (1.6 million) changed little.

This release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector, by industry, and by establishment size.

Job Openings

On the last business day of October, the number of job openings decreased to 8.7 million. The job openings rate, at 5.3%, decreased by 0.3% over the month and 1.1 points over the year. Over the month, job openings decreased in health care/social assistance (-236,000), finance and insurance (-168,000), and real estate and rental and leasing (-49,000). Job openings increased in information (+39,000).

Hires

In October, the number and rate of hires changed little at 5.9 million and 3.7%, respectively. The number of hires decreased in accommodation and food services (-110,000).

Separations

Total separations include quits, layoffs and discharges, and other separations. Quits are generally voluntary separations initiated by the employee. The quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Layoffs and discharges are involuntary separations initiated by the employer. Other separations include separations due to retirement, death, disability, and transfers to other locations of the same firm.

The number of total separations in October changed little at 5.6 million, and the rate was unchanged at 3.6% for the fifth consecutive month. Over the month, the number of total separations increased in professional and business services (+121,000).

In October, the number of quits changed little at 3.6 million, and the rate was 2.3% for the fourth consecutive month. The number of quits increased in professional and business services (+97,000).

In October, the number of layoffs and discharges changed little at 1.6 million, and the rate was unchanged at 1.0%.

Establishment Size Class

In October, the job openings, hires, and total separations rates changed little for establishments with 1 to 9 employees. The quits rate and total separations rate decreased for establishments with 5,000 or more  employees.

Sources: bea.gov; bls.gov; census.gov; fidelity.com; msci.com; nasdaq.com; wsj.com; morningstar.com; census.gov

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November 2023 Market Review

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