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ECONOMIC UPDATE

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December 2023 | Monthly Economic Update

Source: FactSet

Equities soared during the month of November as softer-than-expected US inflation data strengthened investors’ belief that the Federal Reserve (Fed) was done raising interest rates. This helped shift the sentiment of higher interest rates for longer to interest rate cuts in 2024. Despite geopolitical tensions around the world, the US economy remains resilient, and corporate profits are on the rise, according to data from Factseti. Technology stocks regained their swagger during the month, with the so-called “Magnificent 7”ii mega-cap tech stocks helping drive investment results.

Across the market cap spectrum, value stocks performed better than growth according to the S&P 500 Style Indices. Looking across equity sectors, investment results were varied. The Technology and Real Estate sectors were the top performers, both up over 12%; however, the Energy sector lost value during the month (down 1%).

Bonds broadly saw significant gains as interest rates moved meaningfully lower. The US 10-year note yield fell by over half a percentage, delivering one of the best monthly returns in 10 years (St. Louis Fed Data)iii. The two-year Treasury yield, which is more sensitive to policy moves, fell by over 30bps. Lower quality bonds, such as high yield, also gained 4.5%, reflecting broad risk-on sentiment.

Lastly, broad commodities lost value -2.3% for the month. Despite rumors of OPEC production cuts, oil prices fell during the month as production ramped up to historic highs in the US. The price of Gold increased during the month and is at a six-month high, with the weaker dollar providing support for the metal. The Real Estate index spiked, with US REITs increasing by 11.87%. This was largely due to mortgage rates retreating in November after topping 8% in October.

With stocks and bonds increasing in value during the month, traditional balanced portfolios performed well with the global 60/40 index blend up 7.6% in November.

Source: FactSet

The Monthly Riddle

What must be in the oven yet can not be baked?
Grows in the heat yet shuns the light of day?
What sinks in water but rises with air?
Looks like sand, but is fine as hair?

LAST MONTH’S RIDDLE: What reordered word is a mistake?

ANSWER: Errored, which is an anagram of reorder.

Tip of The Month

Consider creating a budget for your holiday expenses. This can involve designating specific amounts for gifts, decorations, and festive activities, with a focus on maintaining adherence to these set limits.

Important Information
This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation.

It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments.

Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies.

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