Monthly Observations from CIO, Chris Zaccarell
Markets in Review
Stocks staged an impressive rally in November, with the S&P gaining 8.9%, increasing its year-to-date gains to 19.0%. The MSCI All Country World index also jumped, gaining 9.1% for the month, which improves its year-to-date return to 14.7%. Bonds also jumped with the Bloomberg BarCap U.S. Aggregate Bond index up 4.5% in one month, bringing its year-to-date return to a 1.65% gain. Inflationary pressures have receded and the Federal Reserve has indicated that they are going to stop raising interest rates as a result. Investors are looking ahead to future rate cuts, but the Fed is being more cautious in their outlook signaling that they will pause their rate hikes for now, but aren’t ready to claim “Mission Accomplished” in their inflation fight.
- Slowing inflation data has allowed the Federal Reserve to stop raising interest rates.
- OpenAI, the company behind ChatGPT, fired their CEO but was forced to reverse course.
- The stock rally in November bodes well for December and possibly next year.
News in Review
Below are some stories that caught our eye this past month. To learn more, follow the links to the full article.
Despite a rapidly growing economy – Gross Domestic Product (GDP) is growing at 5.2% – the rate of inflation is slowing down. Because prices are increasing more slowly, the Federal Reserve has stopped raising interest rates, even though the economy continues to grow. Investors are now anticipating rate cuts, but the Fed has shown no indication that they are ready to begin lowering rates, so it may take longer than people expect for interest rates to come back down.
OpenAI, the company that took the world by storm last year when they released their ChatGPT software, fired their CEO without warning. Sam Altman, who was well known in the artificial intelligence community, was blindsided by the decision, as was one of the biggest investors in the company, Microsoft. Given the uproar within the company – hundreds of employees threatened to quit – and by their investors, the board had no choice but to re-hire Mr. Altman.
The stock market in November rallied the most in over a year and history would suggest that a rally that strong will be followed by gains in December and next year as well. Of course, history doesn’t guarantee anything in the future, but when the market gains by 8% or more in any month, it typically rises 1.8% the following month (e.g. the average gain, when looking at data from 1950-2022). Likewise, 90% of the time this has happened in the past, the stock market was higher a year later. While no one knows what will happen with Fed interest rate policy or whether or not the economy will fall into recession, in the absence of Fed rate hikes or a recession, it’s possible that the stock market rally will continue well into next year.
The makers of the Stanley tumbler – a competitor to YETI – were pleasantly surprised to learn of how durable their product was after seeing a video from a woman whose car caught on fire. The woman was unharmed and apparently, the drink container wasn’t either, so the president of Stanley, Terence Reilly, decided to buy the woman a new car as a goodwill gesture (and because of all of the great publicity).
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S&P 500 INDEX: The Standard & Poor's 500 Index is an unmanaged, capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
NASDAQ 100 INDEX: The Nasdaq 100 Index is an unmanaged, capitalization-weighted index of the largest 100 non-financial stocks traded on the Nasdaq market. Unlike the S&P 500, it does not represent all major industries and may be more volatile than more broadly constructed indices.
MSCI ACWI INDEX: The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 24 emerging markets (EM) countries. With 2,495 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index: The Bloomberg U.S. Aggregate Bond Index is a broad-based index of the U.S. investment-grade, fixed-rate bond market, including both government-related and corporate securities and mortgage-backed and asset-backed securities.
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