Tucker Financial Weekly Market Review: November 24th, 2023

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.