Welcome to our November 2023 Viewpoints, a monthly bulletin from PDS Planning to our valued clients and friends. Our goal with each issue of Viewpoints is to provide you with a wide variety of perspectives on life and wealth. Feel free to share with others.
Finishing Strong, and Top Heavy
After a tough stretch from the end of July through the end of October, most of the 3rd quarter, the stock market (S&P 500) has bounced back in a big way since then. It took 65 market days to lose about -10.50%, then only 18 trading days to make nearly all of the loss back. While we love to see more green than red, it also provides a good reminder on the importance of staying invested!
We’ve talked about the performance of the top stocks in the S&P 500 index providing most of the year to date return, the magnificent 7 as they’ve been dubbed. These large stocks have continued pushing higher while the rest of the index has all but maintained value. The market breadth has been narrow. And as it remains narrow, the weighting of the top 10 stocks continues to grow. As of close of market 11/21, the top 10 stocks make up 33.3% of the index by market capitalization. This has been a benefit year to date since the top 10 have been performing the best, but it is something to continue to be mindful of on the grounds of diversification.
Tag, You’re It
After storming higher quicker than ever before, interest rates appear to be settled at current rates after Fed minutes have pointed toward a pause on more rate hikes. Looking back at the last 5 periods of rate pauses (the time between the last hike and first cut), rates appear to tag markets in – and appear to have done so this year already – as the average annual return for stocks and bonds has been 23% and 14% during those time periods, respectively.
*pssht* This is your Captain Speaking
2024 is another Presidential election year, so politics will undoubtedly be put up against economic and stock market performance. Regardless of which way you may lean, history shows us party doesn’t matter to the markets. Long-term investors have benefited from remaining invested regardless of who’s at the helm. There will almost certainly be an increase in market volatility with an unknown as important as the President creeps closer, but like we looked at above, change can happen quickly!
Inflation is Cooling Across the World
After nearly two years of rising inflation, countries around the world – in both developed and emerging markets – are seeing it cool down. Where red is high inflation and blue is lower, the chart still makes it look pretty messy. But the overall sentiment is inflation has been getting better, more manageable. Manageable for central banks and the Fed, and more manageable for the consumer.
In the US, savings rates are down compared to pre-covid years (left chart), but households still have excess savings (top right chart) to help weather the higher prices for their household expenses.
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