Global Markets Take Off in November

Stock markets in the U.S. and around the world came roaring back in November, a welcome relief given the abysmal performance for the previous three months.

For the month of November:

  • The DJIA leapt 8.0%;
  • The S&P 500 jumped 7.8%;
  • NASDAQ advanced 9.1%; and
  • The Russell 2000 gained 8.3%.

There were a lot of milestones to celebrate, including that the S&P 500’s jump was only achieved 10 times during the same month since 1928 according to Bloomberg and it was the S&P 500’s biggest monthly gain since July 2022. Interestingly, it was also NASDAQ’s best monthly gain since July 2022 and November was the DJIA’s best month for gains since October 2022.

In keeping with U.S. markets, performance in developed markets outside the U.S. in November was fantastic too – as every one of the 38 developed markets tracked by MSCI was positive – the complete opposite of the previous two months. Performance in the emerging markets tracked by MSCI was very good too, with all of those 46 indices advancing in November, 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, better but still high inflation, the

Fed, labor and housing markets and continued unrest in the Middle East.

Volatility, as measured by the VIX, trended down in November, beginning the month under 17 and ending the month under 13, never moving above its beginning-of-the-month level.

West Texas Intermediate crude also trended down this month, losing about $5/barrel to end the month at $75.52/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 12 leaping more than 10%.

Performance for emerging markets was just as solid, with all 46 indices moving up for the month – with over 17 gaining more than 7%.

Sector Performance Almost All Positive

For the month of November, sector performance was almost entirely positive, with 10 of the 11 advancing and 6 of those jumping by double-digits as only the Energy sector retreated modesty. Contrast that with the previous month’s performance, when 10 were negative as the Utilities sector squeaked out a modest gain of about 1%. And the two months before October were very different from November’s performance too as the months of September and August only saw the Energy sector positive.

In addition, for November, the range in sector-returns was decently wide relative to previous months, with Information Technology up almost 15% and Energy down about 2%.

Finally, every single sector performed better in November versus October and October saw 8 sectors perform better relative to September. Glass half full? Here are the sector returns for the month of November and October (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 at an annual rate of 5.2% in the third quarter of 2023, according to the “second” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.1%.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 4.9 percent. The update primarily reflected upward revisions to nonresidential fixed investment and state and local government spending that were partly offset by a downward revision to consumer spending. Imports, which are a subtraction in the calculation of GDP, were revised down.

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 accelerations in consumer spending and private inventory investment and an upturn in exports that were partly offset by a deceleration in nonresidential fixed investment. Imports turned up.”

CPI Unchanged in October – the 31st Straight Month With Inflation Above 3%

The U.S. Bureau of Labor Statistics reported today that the Consumer Price Index for All Urban Consumers was unchanged in October on a seasonally adjusted basis, after increasing 0.4% in September. Over the last 12 months, the all items index increased 3.2% before seasonal adjustment.

Specifically:

  • The index for shelter continued to rise in October, offsetting a decline in the gasoline index and resulting in the seasonally adjusted index being unchanged over the month.
  • The energy index fell 2.5% over the month as a 5.0% decline in the gasoline index more than offset increases in other energy component indexes.
  • The food index increased 0.3% in October, after rising 0.2% in September.
  • The index for food at home increased 0.3% over the month while the index for food away from home rose 0.4%.
  • The index for all items less food and energy rose 0.2% in October, after rising 0.3% in September.
  • Indexes which increased in October include rent, owners’ equivalent rent, motor vehicle insurance, medical care, recreation, and personal care.
  • The indexes for lodging away from home, used cars and trucks, communication, and airline fares were among those that decreased over the month.

Inflation Over The Past Year

  • The all items index rose 3.2% for the 12 months ending October, a smaller increase than the 3.7% increase for the 12 months ending September.
  • The all items less food and energy index rose 4.0% over the last 12 months, its smallest 12-month change since the period ending in September 2021.
  • The energy index decreased 4.5% for the 12 months ending October, and the food index increased 3.3% over the last year.

Consumer Confidence Bounces Back After 3 Straight Monthly Declines

“The Conference Board Consumer Confidence Index increased in November to 102.0 (1985=100), up from a downwardly revised 99.1 in October. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – ticked down slightly to 138.2 (1985=100), from 138.6. The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – rose to 77.8 (1985=100) in November, up from its downwardly revised reading of 72.7 in October.

Despite this month’s improvement, the Expectations Index remains below 80 for a third consecutive month—a level that historically signals a recession within the next year. While consumer fears of an impending recession abated slightly – to the lowest levels seen this year – around two-thirds of consumers surveyed in November still perceive a recession to be “somewhat” or “very likely” to occur over the next 12 months. This is consistent with the short and shallow recession we anticipate in the first half of 2024.”

Present Situation

“Consumers’ assessment of current business conditions was, on balance, slightly more positive in November.

  • 19.8% of consumers said business conditions were “good,” up from 18.3% in October.
  • However, 19.5% said business conditions were “bad,” up from 18.8%.

Assessment of Family Finances/Recession Risk

Consumers’ assessment of their Family’s Current Financial Situation improved in November.

Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months abated in November to the lowest levels seen this year – though two-thirds still expect a downturn.”

Existing Home Sales Drops to 13-Year Low

Existing home sales decreased 4.1% month-over-month in October to a seasonally adjusted annual rate of 3.79 million. That is the slowest pace of sales since August 2010. In addition, sales were down 14.6% from the same period a year ago.

  • The median existing home price for all housing types increased 3.4% year-over-year to $391,800, the fourth consecutive month of year-over-year price increases and the highest ever for the month of October. The median price for single-family homes increased 3.0% year-over-year to $396,100.
  • The inventory of homes for sale at the end of October was 1.15 million units, up 1.8% from September and down 5.7% from a year ago.
  • Unsold inventory sits at a 3.6-month supply at the current sales pace, up from 3.4 months in September and versus 3.3 months in October 2022. It remains well below the 6.0-months’ supply typically associated with a more balanced market.
  • 66% of homes sold in October were on the market for less than a month. Properties typically remained on the market for 23 days, up from 21 days in September and 21 days in October 2022.

U.S. Home Sales Over the Past 25 Years

Durable Goods Orders Decline

Durable goods orders for October declined 5.4% month-over-month. Excluding transportation, durable goods orders were flat month-over-month.

Consumer Sentiment Declines Again

The final reading for the University of Michigan Consumer Sentiment Index for November came in at 61.3 versus October’s final reading of 63.8. In the same period a year ago, the index stood at 56.7 and November marks the fourth straight month that consumer sentiment has declined.

Sources: bea.gov; bls.gov; census.gov; conference-board.org; nar.realtor; msci.com; fidelity.comnasdaq.com; wsj.com; morningstar.com

Read More Articles:

October 2023 Market Review

December 2023 Market Review

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