November Ends With a Whimper

October 2015 proved to be the best month for stocks in the past four years and among the top five over the past 10. In contrast, November was basically flat, with the domestic equity markets showing only small gains from the previous month and the international EAFE down more than 1%. Market participants may be in a holding pattern until they absorb important data on manufacturing, employment and retail sales set to be released toward the end of the first week of December. Observers are also awaiting results from the Federal Reserve’s policy meeting in mid-December.

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In addition, investors remain vigilant for ripple effects from geopolitical turmoil and global economic concerns, particularly the weaker Chinese economy and Japanese recession. The latter’s economic policies weren’t enough to combat a stagnant economy, causing it to fall into its fourth technical recession in five years. Japan’s Government Pension Investment Fund, the world’s largest, lost $1.1 trillion in value, its worst quarterly loss since 2008. In Europe, the euro has weakened against the dollar, but European stocks traded at three-month highs in anticipation of further stimulus from its central bank, as well as investor optimism that the global economy is strong enough to withstand higher U.S. interest rates.

The Federal Reserve has signaled a strong likelihood of a December increase in its target rate, but officials have emphasized that the pace of further rate increases is expected to be

gradual. The Fed’s initial move appears to be largely factored into the financial markets, but not entirely. And domestic equity markets seem to be amenable to the idea.

“If history is our guide, that show of confidence in the outlook of the economy could remove much of the uncertainty in the market and help convince investors that we are heading in the right direction,” wrote Andrew Adams, CMT, of the Raymond James Investment Strategy team in his November 20 commentary. “In fact, while we usually see choppy markets right after a Fed rate increase, that period of volatility is generally followed by pretty good returns.”

The markets also seem to like lower oil prices, according to Raymond James’ Chief Investment Strategist Jeff Saut, though he believes that crude oil is still in the process of bottoming.

We will, of course, continue to monitor the latest market and economic news and share with you the most relevant updates. In the meantime, please feel free to contact us if you have any questions. We always appreciate hearing from you.

Investment NewsLaura Kuntz