Monthly Market Summary
The S&P 500 Index gained +9.1% in November, slightly underperforming the Russell 2000 Index’s +9.2% return. Ten of the eleven S&P 500 sectors traded higher, with only Energy trading lower as the price of oil declined -6.2%.
Corporate investment-grade bonds produced a +7.5% total return as yields declined, outperforming corporate high-yield bonds’ +4.9% total return.
International stocks underperformed U.S. stocks for a second consecutive month. The MSCI EAFE Index of developed market stocks gained +8.2% and outperformed the MSCI Emerging Market Index’s +7.8% return.
Stocks Trade Higher as Treasury Yields Reverse Lower
The big story during November was the decline in Treasury yields. The bond market experienced large moves in interest rates, with the 10-year Treasury yield falling to 4.36% from over 5% in October. For context, the -0.54% decline in the 10-year yield ranks among the biggest 1-month drops since December 2008, when the Federal Reserve cut interest rates by -0.75%. Falling Treasury yields provided relief to bonds, which have traded lower as the Federal Reserve hikes rates. The Bloomberg U.S. Bond Aggregate Index, which tracks a broad index of U.S. bonds, produced a +4.6% total return. It was the index’s first gain in seven months and its biggest gain since 1985.
The decline in yields helped the stock market rebound after trading lower for three consecutive months. The S&P 500 recorded its biggest monthly gain since July 2022 and currently trades less than 5% below its all-time closing high. The NASDAQ 100 Index gained +10.8% as mega-cap growth stocks such as Microsoft, Apple, and NVIDIA traded toward new all-time highs. Technology was the top-performing S&P 500 sector as the rally in growth stocks propelled the sector to a new all-time high. Real Estate followed close behind, benefiting from falling interest rates that provided relief to property owners. Defensive sectors, including Consumer Staples, Utilities, and Health Care, lagged as the market traded higher.
Investors Are Cautiously Optimistic of a Goldilocks Scenario
The Goldilocks scenario is based on the premise that the Federal Reserve has accomplished its mission of lowering inflation without tipping the economy into a recession. The markets received some good news last month as the third quarter GDP growth was revised higher to 5.2%. The S&P 500 earnings grew year-over-year during the third quarter, the first time since Q3 2022. Inflation eased and investors are now expecting multiple rate cuts in 2024. The opposing scenario is focused on the Fed keeping rates at high levels for a longer period. Concerns have also centered on the lag effect of the tightening cycle, the consumers’ shrinking excess savings, and household debt hitting a record high 17.29 trillion dollars led by mortgage, credit card, and student loan debt. The market will be watching closely to see if the strength of the economy continues into 2024.
This material prepared by TrinityPoint Wealth is for informational purposes only. Additional data provided by MarketDesk Research. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by TrinityPoint Wealth are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. TrinityPoint Wealth, however, cannot guarantee the accuracy or completeness of such information, and certain information may have been condensed or summarized from its original source.
