November Market Commentary

Market Commentary

After climbing for much of the month stocks sank over the last few trading days of November over concerns of the Omicron variant and potentially additional business restrictions. Stocks had been performing well driven by strong corporate earnings. Roughly 80% of S&P 500 firms topped analysts and earnings rose 40% from a year earlier. Economic readings continue to point to growth, but at a slower rate. The US saw its slowest pace of monthly job gains this year in September with just 194,000 jobs added. More job seekers exited the labor pool last month so, despite the weak hiring level, the unemployment rate dropped to 4.8% from 5.2%. Wages rose 4.6% from a year earlier and initial jobless claims reached a new pandemic era low. Retail sales rose 0.7% in September when a decline was expected, existing home sales rose 7% in September, and consumer confidence rose in September for the first time in three months. The personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose 4.4% in September from the previous year, the fastest pace in 30 years. Core prices rose 3.6%. Third quarter GDP slowed to 2.0%, the weakest growth rate since the pandemic recovery began last summer. Oil reversed course falling 16% in November to finish the month at $66.18 a barrel.

Foreign stocks climbed in October on better than expected earnings results. European companies that have reported earnings to date have posted over a 50% jump in earnings compared to a year ago. The ECB said at the conclusion of its most recent meeting it would stay the course with current policy. It was not planning to cut asset purchases sooner than planned and they do not currently expect to raise their benchmark interest rate next year. Similarly, the Bank of Japan maintained its current benchmark interest rate policy. However, others are making adjustments to become less accommodative. The Bank of Canada said it could raise its benchmark interest rate as soon as April and the Bank of England is considering an interest rate increase in November. OPEC+ agreed to continue to increase production in gradual steps and not accelerate production as many had expected. Emerging markets outpaced developed markets in November, but trailed developed markets over 2021.

Bonds edged up in November as investors moved to safe havens over concerns of the new virus variant. The Fed announced at the conclusion of their November meeting that they would begin tapering their $120 billion a month in bond purchases by reducing it $15 billion a month. The move was made so that the Fed could potentially raise the Federal Funds rate next year. They also said the supply chain bottlenecks that are driving inflation are expected to persist well into next year. At the end of November Fed Chief Powell said the central bank would need to consider accelerating the recently announced timeline for its bond purchase tapering given “persistently higher inflation.” The 10-year Treasury yield had edged higher for much of the month before sinking over the last few days over concerns on the Omicron variant. The 10-year yield ended the month at 1.43%, its lowest level since mid-September, down from 1.55% to start the month. Muni and government bonds were the top sectors for the month and year to date. Longer term bonds topped shorter term bonds for the month, while shorter term bonds outpaced for the year to date.