November Market Commentary

US stocks continued to reach new record highs in November aided by positive economic news, strong corporate earnings, and optimism over the direction of US/China trade talks. With nearly all S&P 500 firms reporting earnings for the third quarter, 75% of firms have reported earnings that beat expectations and earnings overall declined 0.4%, outpacing the 4.6% expected. Economic news remained generally positive in November. Hiring in October topped expectations with 128,000 new hires, despite the GM strike, and August and September hiring was revised up. The unemployment rate ticked up to 3.6% from 3.5% as more individuals joined the workforce. Retail sales grew 0.3%, and durable goods orders rose more than expected in October. US consumer sentiment rose, and business activity reached a reading at a fourth month high in November. Third-quarter GDP was revised up to 2.1% from 1.9%. In November, US stocks surged 3.80% taking the year to date return to 27.34%.

Foreign stocks rose over the month on encouraging economic and trade news. Economic growth in the European Union edged up slightly in the third quarter to 0.9% from 0.8%. Germany edged up as well, growing 0.3% in the third quarter. Japan, however, slowed significantly to 0.2% from 1.8% in the second quarter. China’s Commerce Ministry issued a statement saying the US and China trade negotiators “reached a consensus on properly solving related issues,” upbeat language that progress was being made in trade talks. A measure of Chinese factory activity unexpectedly expanded in November after six months of contraction. Emerging markets trailed developed markets for the month and year to date. Foreign stocks rose 0.93% in November and have climbed 17.10% for the year to date.

Bonds edged down over the month as interest rates rose slightly. Investors grew more optimistic about the global economy and the direction of trade talks and moved away from safe-haven assets. In minutes from the Fed’s October meeting, they offered few clues about their next move focusing more on a wait and see approach as they evaluated global growth and trade and their impact on the US. In testimony on Capitol Hill, Fed Chief Powell said he didn’t see any immediate need to adjust interest rate policy but was open to reassessing with new data. The 10-year Treasury yield rose slightly over the month to finish at 1.78%, up from 1.69% to start the month. For the month, generally, shorter-term bonds outpaced longer-term bonds and credit and muni bonds were the top-performing sectors. The US bond market ticked down 0.15% in November but is up 6.67% for the year to date.