Welcome to summer. Welcome to December. And just like that, the bulls are on the move and the bears are back in hibernation. November was one for the history books. In years to come, we’ll look back at November 2023 as one of the strongest months for financial markets in history. Not only were markets robust, they were also downright broad and inclusive. The S&P 500 advanced 8.9% (Nasdaq 11%), its 18th biggest monthly gain since 1950, and 6th best November since 1930.
It wasn't only stocks that put on a show, the Bloomberg US Aggregate Bond Index closed 4.53% higher, its best month since May 1985 and 8th best return since inception of the index in 1976. It was also the best month for a global 60/40 portfolio since November 2020, and the 9th best month since 1976. What a difference a month makes. On October 27, the broader stock market was on the brink of breaking its bear-market lows. But the lows held (except for micro caps), and the subsequent rally has been broad and dynamic. I also note that during the third quarter, markets were all negative. Stocks peaked at the end of July and spent the next 90 days in turmoil. I recently wrote on the number of problems I see with investors and investing right now. You can read more here - Earnings Recession - That Was so 2022, A Recession of the Mind, and My Tuesday Rant. Most market participants are unable to see through their biases - Recency Bias being one of them, and Overconfidence. The war on inflation is mostly won. The job market is finally slowing down. And earlier Fed hikes are still rippling through the economy and set to do unnecessary economic damage if not reversed soon. The next week is going to be incredibly important and pivotal as to whether this rally continue through Christmas or not. We get the November (US) jobs report this weekend (Friday US time) and it’s the last Non-Farm Payroll report of the year. Followed by the final CPI inflation reading (December 12th) and the last FOMC interest rate decision (December 13th) by just a few days and if the recent data is any indication of what's to come, this may be done and dusted. In fact, the market is pricing in a 99.7% probability of no hike. And if the Fed does not move this month, it will be the third month in a row of sitting on their hands. Historically speaking, rates hikes are done. Whats more is that the market is now pricing in a 65% probability of the first rate cut in March of 2024. With that, this is where stock markets are at in relation to their all time-highs: Dow ETF $DIA: 0% S&P 500 ETF $SPY: -1% Nasdaq 100 ETF $QQQ: -2% Russell 2000 Small Cap ETF $IWM: -22% ARK Innovation ETF $ARKK: -69%
Long-term investors continue to be rewarded. Speculators continue to be burnt. Which game are you playing?