Updated November 17, 2023
Our investment team remains committed to sharing regular updates and market insights to keep you informed. Please look for our next update on December 1.
Market Surge Continues
It appears the economy is cooling. Inflation continues to drop and the Fed may hold on interest rate increases. These factors have allowed both stock and bond markets to continue the rally that began in late October. The S&P 500 is up nearly 10 percent since October 27, crossing the 4,500 level this week. It is now up more than 17 percent year-to-date. The more value-oriented Dow Jones Industrial Average has added more than 8 percent since late October and is up approximately 5.5 percent this year. The tech-heavy NASDAQ has led the way, increasing more than 12 percent during the recent run and is now up more than 34.5 percent year-to-date.
One of the driving factors behind the strong performance in equity markets has been the drop in yields. The benchmark 10-Year U.S. Treasury yield has fallen more than .5 percent since hitting 5 percent in late October. The yield on the 10-Year Treasury now sits at 4.45 percent. Given the inverse relationship between yield and price, this has caused bond prices to rally. The benchmark Bloomberg Bond Aggregate Index is now essentially flat for the year, wiping out what had been a negative 3 percent return in late October.
Positive Inflation Reports
After three months of mostly disappointing news on the inflation front, this week’s Consumer Price Index (CPI) and Producer Price Index (PPI) data was surprisingly good. Headline CPI dropped .5 percent in October to 3.2 percent. For perspective, headline CPI hit 9.1 percent in June 2022. Core CPI, which removes volatile food and energy prices, dropped a more modest .1 percent to 4 percent, its lowest level since September 2021.
Wednesday’s headline PPI report, a measure of wholesale prices, showed a drop of nearly 1 percent to 1.3 percent. Core PPI dropped .3 percent to 2.4 percent. These readings, along with the early November jobs report that showed a slowing labor market, will likely keep the Fed on hold at its next meeting in December.
Biden Meets With China's Xi Jinping
President Biden met with Chinese President Xi Jinping in San Francisco hoping to ease tensions between the two countries. The meeting was likely a success in that regard. However, it appears there was only progress on some minor agreements, with no major policy changes. There was no movement on export controls, investment restrictions or tariffs.
Chinese leadership was likely looking to strengthen economic ties with the U.S., as foreign investment into their country has plummeted in recent years. The Chinese economy has struggled to rebound coming out of COVID-19 lockdowns and is suffering through a real estate crash. Biden was likely looking to smooth relations in an attempt to stave off another security crisis, with much of our foreign policy focus on wars in Ukraine and the Middle East.
What Should I Be Doing With My Investments?
We encourage you to pay attention to the latest developments, but not to lose sight of your long-term investment strategy. Reach out to our investment team to discuss your options and reaffirm your timeline and goals. Call our investment team at (518) 415-4401.