November Market Commentary

US stocks were the top performing asset class surging over the month on optimism over the proposed tax overhaul. Stocks ended the month at all time highs and the Dow topped 24,000 for the first time. The tax overhaul includes a reduction in the corporate tax rate from 35% to 20% and now must be reconciled between the House and Senate versions. With almost all companies in the S&P 500 reporting earnings for the third quarter 74% have beaten analysts’ earnings expectations and 67% topped revenue estimates. The S&P 500 is expected to post 4th quarter earnings growth of 10.5%. In economic news, US companies hired 261,000 new employees in October falling short of expectations, but the unemployment rate fell to 4.1%, the lowest level since December 2000. Auto makers reported solid October sales, new home sales are up 19% over the past year, consumer spending rose 0.3%, consumer confidence has risen for five straight months and is at a 17 year high and the economy operated at its full potential in the third quarter for the first time in a decade. Third quarter GDP was revised up to 3.3% from 3.0%. US stocks jumped 3.04% for the month and are now up 19.93% for the year to date.

Foreign stocks gained in November on global growth optimism. The Eurozone unemployment rate in October fell to its lowest level since 2009. Manufacturing activity in China picked up in November topping forecasts. OPEC and a Russian group of big oil producers agreed to limit oil output through the end of 2018. They are pledging to withhold about 2% of the world’s daily output. Japan’s GDP grew at 1.4% in the third quarter marking its longest growth streak in 16 years. Emerging markets trailed developed markets for the month. In November, international stocks rose 0.93% taking their year to date advance to 24.54%.

Bonds fell over November as interest rates rose driven by the tax bill and higher inflation expectations. The Fed left interest rates unchanged at its most recent meeting, but stated they remained on pace for one more interest rate increase this year. The have one remaining meeting in mid-December. Jerome Powell was nominated to be the next Fed Chairmen. He is expected to continue current Chairwomen Yellen’s policies. The Bank of England raised their benchmark interest rate to 0.5% from 0.25% for the first increase in a decade. The 10 year Treasury yield rose over the month ending at 2.42%. For the month, generally, long term and credit bonds were the top performers. The broad bond market edged down in November falling 0.13%. For the year, the total bond market has gained 3.07%.