December 2023 | Monthly Economic Update
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.
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.
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