November Economic Update
Market Summary
The major US stock market averages slid lower for a third consecutive month in October, although most of these losses have since been regained in the first week of trading in November. The S&P 500 Index retreated -2.27%, the Nasdaq Composite dipped -2.88%, the Dow Jones Industrial average lost -1.14%, and the Russell 2000 small cap index fell -5.38%. (1)
Israeli Conflict
The biggest development over the past month has been the renewed tensions between Israel and Hamas. As of the writing of this newsletter, the conflict has not materially impacted the US stock market to any significant degree as other major national powers, such as the US and Iran, have largely avoided escalation. While there is no way to predict how this will play out, the concerns for the markets hinge upon containment of the matter, namely, to avoid any disruptions with middle eastern oil supply shocks. This will be a lingering concern until de-escalation within the region is established.
Economic Developments
With the exception of the Israeli conflict, last month provided few economic data surprises. On October 12, the monthly inflation data was released showing headline CPI holding steady at 3.7% which was the same as the previous report released in September. (2)
Last week on November 01, the Federal Reserve announced their latest monetary policy. The decision was to once again to not raise short-term interest rates which was the same result as the September meeting. Citing long-term interest rates moving higher, Fed Chair Jerome Powell stated the market was largely doing to the work of the Federal Reserve and no further action would be required to adjust short-term interest rates at this time. It was reiterated that the Fed believes the threat posed by inflation becoming entrenched into our economy may warrant additional interest rate increases as we move into the new year and all policy decisions will be data dependent. (3)
Looking Forward…
Since the end of July, the broad-based S&P 500 has experienced a routine -10% pullback from that high point and has now started to trade back into the middle of that range to begin this month. Such a pullback is common for the end of summer into early fall before a typically strong period for the markets begin in November and December. However, there are some concerns regarding a potential “Santa Claus rally” this year, mostly revolving around consumer spending.
On their most recent conference calls, both Apple and Amazon provided caution regarding weakening holiday guidance during what is typically the strongest time of year for retailers. We mentioned similar trends in last month’s newsletter as consumer data is weakening with decreased spending, wages stagnating, inflation holding strong, student debt payments being reinstated, and the job market beginning to show vulnerabilities. It wouldn’t be surprising to see the markets move largely sideways through the end of the year in anticipation for these consumer data to develop into the first quarter of next year and after the holiday season ends. (4)
Monthly Financial Tip:
Most consumer expenses boil down to choices and options rather than necessities. Keeping that in mind could help you save money month-to-month.
Citations:
1. WSJ.com, Oct 31, 2023
2. Investing.com, Oct 12, 2023
3. Federal Reserve, Nov 01, 2023
4. CNBC, Nov 06, 2023
Disclaimers:
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
