Ultra Weekly Update – November 27, 2023

MARKET DASHBOARD

MARKET COMMENTARY

In a holiday shortened week, the major indices all posted gains of between 0.5% and 1%. The S&P 500 notched its 4^th straight week of positive returns, and is now +11% higher than its pre-Halloween rally level.

But are investors getting too complacent about the prospects for the current rally to continue through the rest of the year? Conspicuously absent has been any significant volatility in the market, and this phenomenon is not unique to just this most recent rally. The VIX is down around 40% for the year-to-date, close to a 3-year low, and it’s worth bearing in mind that volatility has usually rebounded with a vengeance when the VIX has hit these levels in the past.

In fact, the three most significant economic data releases this past week were not particularly bullish for stocks’ future prospects.

The first, the Consumer Sentiment Index, finished with a reading below 75 for the 28^th consecutive month, which matched its record during the GFC over a decade ago.

Source: CharlieBilello

Meanwhile, the US Leading Economic Indicators (LEI) index recorded its 19^th straight month of declines and the Conference Board’s accompanying statement noted, “The Conference Board expects elevated inflation, high interest rates, and contracting consumer spending – due to depleting pandemic saving and mandatory student loan repayments – to tip the US economy into a very short recession. We forecast that real GDP will expand by just 0.8 percent in 2024.”

And finally, existing home sales were down ~15% compared to last year, marking 26 straight months of decline and highlighting one of the most glaring market dislocations brought about by the Fed’s rate hike cycle.

Source: CharlieBilello

This coming week, we will be seeing data on Consumer Confidence, Personal income and consumer spending, and Weekly unemployment claims. Remains to be seen if continued weakness in the data will continue to only mean one thing for markets: relief that there’s little chance of an imminent rate hike.

STAT OF THE WEEK

News you can use…

Historically, November through February are the best months for small-cap outperformance relative to large-cap returns.

Source: Edward Jones

BONUS STAT OF THE WEEK

How about a little more data on the market’s historical returns in December…

BONUS STAT OF THE WEEK 2

Holiday sales are on trend for the lowest growth rate of the past 5 years – a good sign if we’re worried about inflation flaring up.

chart_of_the_week

Source: JPMorgan

And for anyone that’s read this far…

Two excellent charts, courtesy of JP Morgan, showing the tremendous bargains currently available in value stocks, but particularly in the Energy section and, to a lesser extent, in Real Estate and Materials.

Value vs. Growth