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Markets in November 2023 Thumbnail

Markets in November 2023

Investment Insights

  • November was a reminder of just how quickly things can change. After the past three months where the S&P 500 saw declines of 8.25%, with Small, Mid and International markets falling even further. The S&P 500 was up 9.13% for the month, with Small, Mid, and International markets up similarly. The Barclays US Aggregate Bond index had its best month since May 1985 up 4.53%, pushing it back into positive territory for the year. 
  • The move came as inflation continues to decline while economic data remains resilient, reinforcing the expectations for a soft landing. Headline and Core CPI data dropped to 3.2% and 4% over the year respectively. The bigger than expected fall raised hopes that the Fed was indeed done raising interest rates and that they could begin cutting them sooner next year, causing the 10-year Treasury to drop to 4.4% from the 5% level reached in October. 
  • Every sector was up for the month besides Energy, as slowing demand is outweighing production cut concerns. The more interest rate sensitive sectors were the best performers with Tech, Real Estate, Consumer Discretionary, and Financials all up double digits. 
  • Employment data is cooling, albeit very slowly which is what the Fed wants to see for wage growth to get back in line with their 2% inflation target. 

Why It Could Keep Going Higher

  • The primary driver of U.S. economic growth is the U.S consumer and most Americans are fully employed and enjoyed significant wage gains over the past couple years. Most with low debt service costs.
  • Inflation continues to decelerate, albeit slowly and the Fed has paused hiking rates the past two meetings.  
  • Earnings are rebounding so far in Q3 and analysts forecast additional growth in Q4. 
  • There is a lot of cash is still on the sidelines and investors may put it to work on the fear of missing out. 

Biggest Risk

  • Inflation and the Fed’s response to get it under control are still the biggest risks the economy faces currently. Fed policy impacts the economy with a significant lag so it is hard to determine what the future effects will be from the current rate hikes.
  • Most foreign central banks are tightening policy at the same time, which may further amplify a global contraction.
  • Some research reports indicate that excess savings accumulated during the pandemic may have already been depleted or will be in the near future. Student loan payments also just began again in October. 
  • Credit card debt is reaching an all-time high, delinquency rates are rising on auto loans and credit card balances, and we’re starting to see an increase in bond defaults. 
  • If the economy does begin to slow down, high wage costs may force employers to lay off workers to maintain profit margins. 
  • Additional bank failures and commercial real estate defaults.

  • Further Geopolitical tensions.

Economic Data

  • Q3 GDP was revised up to 5.2%. 
  • Core PCE prices rose 0.2% in October, and 3.5% over the year. 
  • Existing home sale declined for the fifth straight month.
  • New home sales dipped 5.6% in October, after September’s 8.6% gain. Over the past year, existing home sales have fallen 14.6%, while new homes sales have increased 17.7%. 
  • ISM Manufacturing PMI remained unchanged at 46.7 for October and in contraction for the 13th consecutive month.
  •  ISM Services PMI declined to 51.8, yet still remained in expansion territory. 
  • PPI fell to 1.34% year over year. 
  • Retail sales fell 0.1% in October but have remained resilient. Black Friday sales data is showing an increase in spending over last year. 
  • The Leading Economic Index fell further again in October, marking 19 straight months of declines. 
  • NFIB Small Business Survey continued to show pessimism, with both sales and earnings declining. 

What We Are Doing


The economy continues to defy high interest and high nominal GDP supports corporate earnings. The goldilocks data of falling inflation, a resilient consumer, and slightly cooling employment data made for a great November in the markets. The odds of a soft landing have increased but we are not out of the woods yet.

 The markets are once again pricing in an idealistic scenario with interest rate cuts beginning much sooner than what the Fed has indicated. Any deviation from this best case scenario playing out could cause the markets to reprice once again. Overall, we are still maintaining a slightly conservative tilt in our portfolios awaiting further clarity that the cracks that are forming in the economy won’t break.

 That said, today’s market is still an attractive entry point to put some cash to work. Even if the economy deteriorates, it will likely be mild and fixed income will once again provide a nice hedge. We will continue to watch the economic dynamic carefully to take advantage of opportunities as they present themselves.