November Market Commentary

US stocks rebounded in November after receiving a boost from mid-term election results and comments by the Federal Reserve Chairman that led investors to believe the Fed might ease their pace of interest rate hikes.  Economic news was generally positive with 250,000 new hires in October, which well surpassed expectations, wages gained 3.1%, their largest gain in nearly a decade, retail spending jumped 0.8%, inflation remained below the Fed’s target rate and consumer confidence remained high.  However, two significant areas of the economy, auto sales and housing, have trended down. Existing home sales fell 5.1% from a year earlier and auto sales fell roughly 2% in October, both impacted by higher interest rates.  Oil continued to plunge in November, falling 22% over the month, ending at $50.93 a barrel.  It was the worst one-month loss since October 2008.  In November, US stocks rose 2.00% bringing the year to date return to 4.48%.

Foreign stocks gained over the month on the potential for a more accommodative Fed and reduced trade tensions.  Recent data has shown that global economic growth has slowed.  In the third quarter, Japan’s Gross Domestic Product (GDP) contracted 1.2%, while Germany’s GDP contracted 0.8%, for the first quarterly drop in three and a half years.  The European Central Bank plans to move forward with ending its bond buying program at the end of the year despite the weakening growth trend in the European Union (EU).  Consumer spending in China hit its lowest pace in five months.  The UK and EU were able to reach a draft deal to allow the UK’s exit from the Eurozone and EU leaders approved the deal, but many hurdles remain, particularly in the UK, before approval.  The US and China reopened trade talks in hopes of curbing the escalating trade war.  Emerging markets well outpaced developed markets for the month.  International stocks rose 0.95% in November but are still down 9.83% for the year to date.

Bonds rose in November as interest rates eased.  The interest rate decline was driven by concerns about global growth and comments made by Fed Chairman Powell.  In a speech he said the Fed Funds Rate was “just below” a neutral level easing investor worries that the Fed would continue to raise the Fed Funds rate aggressively.  At the Fed’s November meeting they made no changes to the Fed Funds Rate, gave a positive outlook on the economy and strongly hinted at a December rate hike.  They also expect to raise rates between two and four times in 2019.  The 10-year Treasury yield ended the month at 3.01% falling from 3.15% to start the month.  The 10-year yield is at its lowest level since mid-September.  For the month, Municipal and Treasury bonds were the top performing sectors and longer-term bonds topped shorter-term bonds.  The broad bond market gained 0.60% in November raising the year to date performance to -1.79%.