Markets “In a Nutshell” for November 20, 2023
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 1.90%, the S&P 500 was up 2.20%, and the NASDAQ rose 2.40%. Foreign stocks (MSCI EAFE) were also up, rising 3.40%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 4.43%. (Data source: Wall Street Journal)
Inflation Continues to Decline
The October CPI data showed annual inflation declining from 3.7% to 3.2% in major part to a decline in gas prices. Oil is now down over 20% from its high in September and could continue to help the CPI number come lower. The Core CPI, which excludes food and energy, fell from 4.1% to 4.0%, this was right in line with expectations for the market. This was also the lowest reading in two years and continues to show the progress that has been made on the inflation battle. Inflation is slowing faster than the Fed expected as in September projections where CPI would be at 3.7% at the end of 2023 and 2.6% at the end of 2024. These projections will most likely be updated at the next meeting and it is becoming more and more likely that we are done with rate hikes for this cycle.
Falling Yields and Fed Policy
Yields have continued to fall recently as the 10-year treasury has gone from 5% to below 4.5% currently. The market is currently projecting no more rate hikes and more than double the rate cuts the Fed has forecasted for 2024. The Fed will likely push back on rate cuts in the near future as they want to ensure inflation gets closer to their goal of 2% but if we continue to see inflation fall they will likely follow the market expectations. This could give a boost to markets in 2024 as higher rates can put stress on not only the consumer but also on companies as the cost to borrow has rapidly increased. Although many thought it was very unlikely when inflation was at its peak, it seems we may be getting closer and closer to the “soft landing” that had been discussed so much in 2022 and 2023.
How much is the equal weight S&P 500 below from its all time high? (Scroll Down for Answer)
Have a Great Week!
1. 12%, the equal weight S&P 500 gives all 500 companies the same weighting unlike the S&P 500 where the larger companies have a bigger weighting. The S&P 500 is only 6% off its all time high which goes to show just how much the “Magnificent Seven” have carried the market rebound