December 2023 Market Update

August, September, & October really tested investor’s patience with back-to-back declines into correction territory.  November, however, put a definitive stop to that…and just in time for the holidays too!

All 3 stock indexes posted strong returns with the S&P 500 logging one of its best months on record.  (Every sector was up except for energy.)  Even the Bond Index rose 5% during the month.  (I’d like to think it was the holiday spirit kicking in ahead of Thanksgiving).  An important theme last month was the broadening out of the markets.  The Equal-Weight Index had a strong rally and is now up over +5% YTD while Small Caps finally saw some gains as well.  Sure, tech (+12.7%) was still the primary outperformer but Real Estate and Financials, which had been lagging tremendously all year, were right behind tech to enjoy big months of their own (up 12.2% & 10.7% respectively).  It was much needed.

Here are the YTD numbers:

 

Brokered CD Rates

As of 11/29/2023. *APY represents the interest earned based on simple interest calculations. Rates are subject to change and availability. Minimum purchase may apply.

 

So, what sparked the rally?

 

Seasonality may be the simplest reason.  Markets were hot most of the year but mostly led by big tech and excitement around AI.  August and September have traditionally been poor-performing months, and this year proved to be no exception.  We’d previously mentioned we thought we were overdue for a correction and that’s exactly what we got.  By late October, however, the correction was looking oversold, and the markets rallied back dramatically.  It ended up looking like a textbook seasonal correction.

Inflation continues to trend lower by every measure and currently sits at 3.2%.  The Fed’s preferred gauge of inflation is the Core PCE reading, which came in at the lowest since March 2021.  In fact, many products and goods have entered deflation territory as was confirmed by Walmart’s earnings call with management last month.  As anyone who does the grocery shopping can confirm, grocery prices still feel high, but they are showing signs they’re beginning to cool to some degree.  The average Thanksgiving dinner cost 5% less than it did this time last year.

The Fed didn’t raise rates in November as some had suspected they might.  This means the last rate hike we saw was way back in July.  The employment and the jobs market have been incredibly strong the past 2 years but are starting to show signs of easing.  Some headlines have said this rate-hiking cycle is now over.  We don’t know if we’re ready to say that just yet, but we do feel it’s fair to say the bar to raise rates any further is pretty high at this point.  (We won’t even waste our time trying to predict when potential rate cuts will happen.  Even Fed Chairman Powell doesn’t know that).

Bond Yields retreated significantly in November with the 10-year Treasury ending under 4.4%, a sharp pullback from the brief 5% they hit only a month ago.  But it was enough to get the bond market back into positive territory for the year.  Prior to November, the bond market was on track for its 3rd straight year of back-to-back declines.  We’re not sure that’s ever happened before.

3rd Qtr GDP was revised even higher to 5.2%.  That’s a big number and why there’s so much focus on the “soft-landing”.  Once again, firms and economists are delaying their calls for a mild recession from early 2024 to mid-2024 or later.

As we bring 2023 to a close in the coming weeks, there are a few things we thought we’d highlight.  The S&P is up over 11% since the low of Oct. 27.  That’s a very fast rebound and feels like it’s in overbought territory.  That doesn’t mean it needs to come back down, but a slight pause to catch its breath wouldn’t be out of the question.  That said, December is historically the 3rd best month of the year for the markets so there is some reason to be optimistic that we may still have some upside left in 2023 just yet.  It also wouldn’t surprise us if there continues to be some rotation in performance from the narrow range of companies that led this year to some of those areas that have felt overlooked and left behind.   Call it a “reversion to the mean” if you will, but lopsidedness in the markets usually rectifies itself at some point.

 

Here's your Useless Fact of the Month:

Looking for a destination for your next holiday getaway with a loved one?  Is Cleveland, OH at the top of your list?  Maybe it should be.  For only $395/night you can stay in the actual home that “A Christmas Story” was filmed in.  The house featured in the movie was an actual home in Cleveland but, once filming concluded, wasn’t much more than an afterthought until some 21 years later when a man from San Diego bought the house on eBay for $150,000. He spent $240,000 of his own money in renovations to make the house an exact replica of the movie inside and out.  It even includes actual props from the movie like Ovaltine in the kitchen, Ralphie’s Red Rider BB gun, & of course a pink bunny suit.

My favorite part of this story is finding out where the guy from San Diego got the money to do all this:  He owns his own business called The Red Rider Leg Lamp Company where he sells replicas of the infamous lamp from the movie.  It’s actually on sale right now for $199 if you need any last-minute gift ideas!

On behalf of John, Lindsay, myself, and everyone here at Signature Wealth Strategies:

We wish you all a Merry Christmas and a Happy New Year!

 

Any opinions are those of Sean Bokhoven and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results.
This is not a recommendation to purchase or sell the stocks of the companies mentioned.  There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small‐cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad‐based flagship benchmark that measures the investment grade, U.S. dollar‐denominated, fixed‐rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges, which would reduce an investor’s returns. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Be sure to contact a qualified professional regarding your situation before making any investment or withdrawal decision.
Brokered Certificates of Deposit (CDs) purchased through a securities broker and held in a brokerage account are considered deposits with the issuing institution and are insured by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the US, Government. FDIC deposits are insured up to $250,000 per issuer (including principal and interest) for deposits held in different ownership categories including single accounts, joint accounts, trust accounts; IRAs, and certain other retirement accounts. The deposit insurance coverage limits refer to the total of all deposits that an account holder has in the same ownership categories, at each FDIC-insured institution. For more information, please visit fdic.gov. About Liquidity: Funds may not be withdrawn until the maturity date Or redemption date, However, the brokered CD, are negotiable, which mean, that although not obligated to do so, Raymond James and other broker/dealers presently maintain an active secondary market at current interest rates, Market value will fluctuate and, if the CD is cashed out prior to maturity, the proceeds may be more or less than the original purchase price, Holding CDs until term assures the holder of par value redemption. CDs are redeemable at par upon death of beneficial holder. FDIC insurance does not protect against market losses due to selling CDs in the secondary market prior to maturity.
Bond prices and yields are subject to change based on market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.
U.S. government bonds and Treasury notes are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value.