Weekly Market Update November 3, 2023, Fed Funds 5.25% - 5.5%, US Ten Year 4.574%, Crude Oil $80.86
November started the week well, with stocks climbing modestly, perhaps due merely to the relief of leaving October behind! The averages surged on Wednesday and continued through the week, fortified by favorable economic data and corporate earnings reports. At the November Fed meeting Powell’s “fed-speak” seemed to indicate that further rate increases may be on hold until next year. U.S. payrolls increased by 150,000 in October, 30,000 less than expected, while September’s figure was revised downward. The unemployment rate rose to 3.9% as measured in the household survey, which showed a decline of 348,000 workers, while the rolls of the unemployed rose by 146,000.
The United States economy continues to chug along nicely. October’s GDP figure was a positive 4.9%. Meanwhile, 81% of companies that reported third quarter earnings so far have exceeded analysts’ expectations. Inflation stays stubbornly high; after bottoming at 3.0% in June, the Consumer Price Index rose every month since and now stands at 3.7%. Some commentators are saying that the Federal Reserve’s 2% inflation target rate is but a chimera, and that we may have to get use to a 3% to 3 ½% inflation rate as the “new” normal. Since 1913 the average rate of inflation as measured by the CPI has been 3.2%.
Many in the financial press has focused on the “narrowness” of stocks’ recovery since their dismal 2022, crediting the major indices advances almost exclusively to seven very large capitalization technology and technology-related stocks, the so-called Magnificent Seven. This has indeed been the case, where all seven of these stocks have far exceeded the index advances:
M&R Capital Management clients whose accounts are invested in our Growth Model have these stocks in their portfolio. While this week’s activity may indicate that the market rally is widening, these stocks should continue to be major players in the Artificial Intelligence future, which Standard & Poor’s expects to grow at a 40% compound annual growth rate over the next ten years.
We continue to recommend investors maintain an allocation to fixed income investments with “laddered” maturities inside of two years. According to Sam Stoval of Standard & Poor’s, there has never been a down year in the stock market from October 31 of the year before the election to October 31 of the election year. You will want to have funds ready when the next bull market in stock returns.
Wishing You a Great Week