Weekly Market Report: December 1st, 2023

Last week markets digested a very busy economic calendar and Fed speak from a dozen speaking engagements sprinkled throughout the week. Continued peak Fed and soft-landing narratives helped equity markets post a fifth consecutive week of gains. We saw some rotation out of year to date winners (magnificent 7) and broader participation across markets. Treasuries continued to rally with bond yields falling across the curve, leaving the 10yr UST (4.22%) at its lowest level since the end of August. The USD (-0.13%) continued its November trend, weakening to late August levels, while the energy patch dragged down overall commodity markets which closed down 1% on the week.

Market Anecdotes

  • Stocks and bonds wrapped up a terrific November last week with the Bloomberg Aggregate Index (+4.53%) posting its best month since 1985, bolstering what was a horrible year for bonds to a positive 1.66% return.
  • Now that we are in the last month of 2023, a brief look at the positive seasonal equity market tailwinds serves up some hopeful holiday cheer that this year rhymes with history.
  • Despite improving equity market breadth last week, a Goldman Sachs look at 2023 illustrates just how prolific the magnificent seven have been.
  • Smaller companies, being more susceptible to higher interest rates, have seen both earnings and sales declines since the FOMC began raising rates.
  • Broadly speaking, the softening labor market, coinciding with fiscal contraction and the lagged effect of higher interest rates informs our latter half 2024 cautious outlook for risk assets.
  • Global central banks have officially become net rate cutters recently but the FOMC speaking circuit last week (@12) reiterated the November meeting narrative which was dovish on balance but delivered with a higher for longer expectation.
  • Fed open market activities, now fully in QT mode, show the Fed as a clear net seller of treasuries and a Treasury department leaning heavily into the front end of the curve.
  • Crude oil traded below $75 last week despite further output cuts from OPEC+ and another potential territorial dispute stemming from a Venezuela referendum regarding a disputed oil rich territory long ruled by Guyana.

Economic Release Highlights

  • October headline (core) PCE inflation registered 3.0% (3.5%) YOY alongside MOM readings of 0% (0.2%), both generally in line with consensus forecasts. Personal Consumption and Personal Income were both in line with forecasts at 0.2% growth for the month.
  • November ISM Manufacturing Index came in below the spot consensus forecast (46.7 vs 47.5) and toward the bottom end of the forecast range. The final PMI Manufacturing registered 49.4.
  • The November Global Manufacturing PMI improved from 48.8 to 49.3.
  • October New Home Sales of 679k came in short of the spot consensus (725k) but within the forecast range of 650k-750k. Pending Home Sales fell 1.5%, slightly less than the -2% forecast.
  • The September Case-Shiller Home Price Index grew 0.7% MOM and 3.9% YOY, generally in line with the consensus forecast.
  • Consumer Confidence Index for November registered 102.0, an improvement versus the prior month and
    slightly above the spot consensus forecast of 101.5.
  • The second estimate of 3Q GDP reflected an upward revision from 4.9% to 5.2% but Personal Consumption was revised lower from 4.0% to 3.6%.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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