Weekly Market Update for November 10, 2023

by Jared Plotz, Director of Research

A November rebound is underway in the markets. Following October’s decline, equity indices have risen 9 of the past 10 trading days, pushing the S&P 500 up over 7% from its Oct. 27^th bottom (with the Nasdaq up over 9%). While fears were building the better part of last month, they appeared to stall out by month-end, then began to dissipate last week. Even geopolitical risk premiums have fallen, reflected in the prices of oil and gold. As market fears subside, money flows into equities resume, and the pace of corporate buybacks picks back up.

Fixed income markets have benefited from the Fed’s pause in rate hikes. We have not only seen the 10-year Treasury move down (by 17bps in November), but also shorter-term Treasury Bills and home mortgage rates. Fed Chairman Powell was decidedly hawkish this Thursday, stating that the downtrend in inflation has produced feints in the past, and therefore the Fed is not yet confident enough to rule out further tightening – but the markets presume hikes are over and cuts will begin by the middle of next year. Both fixed income securities and stocks tend to rally after the final rate hike of a tightening cycle; thus, the market’s upward shot to a 7-week high isn’t too surprising.

This isn’t all to say that we’re in the clear. Risks remain, including a potential US government shutdown, escalating geopolitical conflict, and weakening consumer sentiment. But if economic growth is stable, corporate earnings continue to rise, and the Fed is done hiking, we’d look for markets to continue their grind higher, even if the path remains bumpy.

News flow should pick up next week. How much might October’s CPI report Tuesday morning show the pace of inflation declining? Will President Biden and Chinese President Xi improve the relationship between the two countries when they meet for the first time in a year on Wednesday? Will the US government make progress on at least a stopgap spending bill to avert an 11/18 shutdown? We will see – stay tuned!

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