Coming off the worst month for stocks in 7 years, November was another volatile month that featured the worst Thanksgiving week performance for stocks in 7 years, but the month also had 2 of the biggest up days this year. The late October rally continued into early November with the S&P 500 hitting a high for the month the day after the election. The focus continued to be on rising interest rates and trade talks with China, and the market reacted to news on either. Speculation about a weakening global economy sent oil prices 23% lower for the month and the commodity is now down more than 30% since the first of October. Market leader Apple had a tough month, losing nearly 20% of its value on concerns about iPhone sales and that weighed on the overall market. The S&P 500 had not closed lower in November since 2011, but it took a nearly 5% rally during the last week of the month, the best week in 9 months, to bring the widely followed index back into positive territory. For the month the S&P 500 gained 1.8% and is now 3.3% higher for the year. Many fixed income securities dropped 5-10% during the month, which means more conservative accounts did underperform.
November got off to a positive start with President Trump asking for a draft proposal for a trade deal with China, and the government reported a better than expected 250,000 new jobs created in October. The last 2 days of October and the first 2 days of November are historically the strongest period of the year for stocks, and the S&P 500 did gain over 3% during that 4-day period this year. The first full week of the month was all about the election and the market rallied 2% after the results turned out to be in line with expectations. For the week the S&P 500 gained 2.1%. The second full week started with the Veterans Day holiday on Monday that saw investors continue to rotate out of technology stocks sending the NASDAQ down nearly 3% and the Dow down 600 points. Oil moved lower for a 12th consecutive day, the longest losing streak on record, and the S&P 500 ended the week with a loss of 1.6%. Over the last 10 years the week that includes Thanksgiving has seen the S&P 500 gain an average of 1%, but this year, persistent selling of technology stocks, particularly Apple, sent the S&P 500 down nearly 4%, the worst Thanksgiving week in 7 years. Coming off last week’s low volume selloff, this week began with a better tone for tech stocks and the markets moved nicely higher on Monday and Tuesday. Dovish comments from Fed Chief Powell on Wednesday sent the S&P 500 more than 2% higher and the Dow up more than 600 points. The rally this week virtually eliminated the losses from last week, leaving the S&P 500 in positive territory for an 7th consecutive November.
December is historically the best month of the year for stocks. The average gain over the last 90 years has been 1.4% and the market has closed higher nearly 75% of the time. Interest rates and trade with China are likely to continue to be the biggest market moving issues. We would expect a resolution of the ongoing trade dispute with China to have a positive impact on the market, with any setback in those talks having a negative impact. We have been concerned about valuations, but the 10% decline over the last couple of months and the increase in corporate earnings, has brought valuations back to historic norms. We have said over the past few months that we would be buyers on tradeable dips, and we were. We believe the current administration’s policies are business friendly and should positively impact the markets.
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