Weekly Market Report: November 24th, 2023

Markets last week, effectively a three-day workweek, were characterized by low volumes, a handful of economic reports, and hopefully a good dose of family, friends, and feasts. Global equity markets saw the S&P 500 up 1% and NASDAQ up 0.9%, both delivering a fourth consecutive week of gains. Emerging markets turned in a gain of 0.6% and we also saw a nice rally in developed internationals of 2.4%. Bond yields were relatively quiet with a small and parallel move slightly higher, closing with 10yr yields at 4.47%. Both the USD (-0.50%) and commodity markets (-0.40%) notched slight declines on the week.

Market Anecdotes

  • 3Q earnings season is over, ending with a healthy earnings growth rate of 4.3% YOY totaling $487.1b in aggregate. The beat rate (LT average) 81.9% (66%), miss rate 13.7% (20%), and magnitude 7.3% (4.1%) all compared favorably relative to their respective long-term averages.
  • Decent earnings, disinflation trends, peak FOMC rate cycle, easing financial conditions, and increased soft landing expectations have all contributed to one of the best Novembers for the S&P 500 on record thus far, currently up 8.8% with a few days remaining.
  • For all the S&P headlines in 2023, non-U.S. markets including Japan (+15.8%), Germany (+17.2%), France (+16.4%), Emerging Europe (+27%), and Brazil (+23.7%) have impressed as well. Unfortunately, the same cannot be said for commonwealth countries and China (-6.3%).
  • FOMC minutes released last week showed consensus on a cautious approach regarding additional rate hikes and an expectation that tight policy will continue to weigh on growth and inflation looking into 2024. Market rate cut expectations remain aggressive regardless.
  • Interest rates have fallen from just under 5% (10yr) prior to the November FOMC meeting to under 4.5%, assisted by peak Fed, continued disinflation, and slowing growth narratives, the latter bolstered last week by slowing PMIs and durable goods orders reports.
  • The resilient U.S. consumer has been a key growth driver over the past two years which begs a credit health check in addition to consumer ‘balance sheet’ narratives. A recent look at consumer loan delinquencies from Strategas does seem to square with a cautious view of 2024.
  • The soft-landing narrative has been bolstered by the sample based estimates (2mo lag) of monthly payroll growth which has shown downward revisions every month this year with the exception of July – a sign of overstated 2023 strength following understated strength in 2021.
  • The Biden-Xi summit went relatively well but, even more so than U.S. elections, Chinese geopolitical risk is centered around the January 13th Taiwan elections and whether a pro-mainland government will assume power.
  • A Qatar negotiated temporary ceasefire in Gaza brought temporary reprieve to the war between Hamas and Israel with hostage and prisoner exchanges occurring over the weekend.

Economic Release Highlights

  • U.S. PMI for November registered a composite reading of 50.7 with Manufacturing (49.4 vs 49.9) and Services (50.8 vs 50.5) both generally in line with their respective consensus forecasts.
  • Eurozone PMI for November registered a composite reading of 47.1 with Manufacturing (43.8 vs 43.3) and Services (48.2 vs 48.0) both generally in line with their respective consensus forecasts.
  • UK PMI for November registered a composite reading of 50.1 with Manufacturing (46.7 vs 45.0) and Services (50.5 vs 49.6) slightly better than the consensus forecasts.
  • Existing Home Sales declined 4.1% MOM in October to 3.79M, down 14.6% YOY.
  • Durable Goods Orders contracted 5.4% in October, below the low end of the (-4.4% – 2.8%) range and consensus spot forecast of 3.2%.
  • U of M Consumer Sentiment Index for November was revised higher from 60.4 to 61.3 in the final release.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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