Hello all - we hope you had a nice November.
The markets saw some weakness early in the month, but a late-month rally saw them close well off the lows. For the month, the Dow added 0.3%, the S&P 500 gained a tiny 0.1%, and the Nasdaq, which has a higher concentration of tech stocks, had its first monthly loss since March with a decline of 1.5%.
The markets saw some weakness early in the month, but a late-month rally saw them close well off the lows. For the month, the Dow added 0.3%, the S&P 500 gained a tiny 0.1%, and the Nasdaq, which has a higher concentration of tech stocks, had its first monthly loss since March with a decline of 1.5%.
Here’s a look at how the markets moved this month:
Here’s a look at the performance of the various sectors in the market:
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The market is still trading in the tight range we’ve seen the last several months.
Although the market was higher, this month saw volatility hit its highest level in six months. We’ll talk more about what caused the volatility later.
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AI concerns sparked the selling in the markets this month.
Tech stocks have grown massively over the past year on the back of the AI hype, with these companies spending billions and billions building out AI. Investors have started to worry that the return on all this spending may not be large enough to justify the costs.
The concerns were enough to trigger selling that sent the tech sector and broader markets lower.
There remains a lot of excitement around AI, though, and we are probably still in the early innings of this run.
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Interestingly, Bitcoin also had a very rough month.
It’s interesting because Bitcoin and tech stocks tended to move together. As we can see in the chart below, the gap has become very wide. Is it possible tech stocks sell-off even more? Or perhaps Bitcoin will rebound to close the gap?
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FED
The Fed also had an impact on the markets this month.
The minutes from their latest meeting suggest that a widely-anticipated rate cut in December may not happen. Stocks fell on the news.
The odds of a rate cut were as high as 100%, but this news sent those odds as low as 25%.
Comments from other officials later in the month suggested that a rate cut in December would be likely, in their opinion, and stocks rebounded on the news.
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INFLATION
With the government shutdown, many economic indicators were not released, including the CPI. However, the PPI was released, showing inflation growing again at the business level.
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OTHER ECONOMIC DATA
Other economic data releases were light this month, too, but the info we did receive showed a mixed picture.
The manufacturing side of the economy showed a decline, while the service side saw a decent increase.
Retail sales showed a slight increase.
Consumer confidence continues to be an issue as it continues to fall.
Small business optimism fell again, too.
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Where does the market go from here?
We hit very oversold (cheap) levels in the market this month, and we’re now in that rebound. There may be some time left in the rally, and December is historically a good month for stocks.
We hit very high ‘Fear’ levels this month, and that tends to occur at bottoms of markets.
Zooming out and looking at a much bigger picture, indicators suggest we are at very expensive levels in the markets. This is something to keep in mind for the longer term.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
