Market Update – December 1st, 2023
Author: Joe Maas, CIO SPG Advisors LLC
This week economic data largely came on pace with expectations, as the S&P 500 and Dow Jones Industrial Average picked up another 100 basis points in gains, and the Nasdaq Composite traded flat as of close on Thursday, November 30th.
November proved to be a robust month for both stocks and bonds, as yields fell. The Nasdaq Composite led with a rally of +10.7%, followed by the S&P 500 and the Dow Jones Industrial Average, posting +8.9% and +8.8% monthly gains respectively. Additionally, the Barclays Aggregate Bond Index experienced its best monthly gain since 1985, rising by +4.3%
October PCE Inflation Comes as Expected. Like the more moderate CPI and PPI prints we got earlier in November, the PCE print came in light as economists had expected. Annual PCE inflation ran at 3.0% and Core PCE inflation at 3.5%, both the lowest prints in quite a while. On a monthly basis, PCE was flat, while Core PCE rose a modest +0.2%. All of this comes at a time when the Fed’s inflationary battle has turned from concerns over future rate hikes to excitement for a potential rate cut in the new year.
Personal Income, Spending, and Saving. Alongside the PCE inflation report, we get an influx of other vital economic data including personal income, spending, and savings figures for October as well. Both personal income and personal spending saw an increase of +0.2% in October, while the personal savings rate increased slightly to 3.8%. This month of data shows a more moderately spending consumer, similar to what we saw in October’s weaker Retail Sales data, but this could change quickly as the holiday spending season is in full swing.
|November Consumer Confidence. The Conference Board’s Consumer Confidence Index saw a slight increase in November following three months of decline, as concerns about a recession remain. Also seeing an uptick, the Expectations Index rose from 72.7 in October to 77.8 in November, but remained below a key threshold of 80, which historically signals expectations of a recession. Also in this survey, two thirds of respondents perceive a recession to be “somewhat” or “very” likely in the next twelve months.
|October New Home Sales. In October, new home sales saw a notable increase, down -5.6% from September but up +17.7% compared to October 2022. The median sales price for a new home was $409,300, and the average sales price was $487,000, indicating a focus on the higher-end market by home builders. Although these figures may still sound lofty, the median sales price for a new home in October hit the lowest point since August of 2021, also marking a -17.6% decline in price from a year ago.
The rise in sales largely reflects a backlog from construction projects started in 2022. Home builders are turning to rate buydowns, both temporary and permanent, to subsidize mortgage costs to home buyers, which is protecting the new home market from the stagnancy we’re seeing in the existing home market.
|October Existing Home Sales. Existing home sales tell a very different story compared to new home sales, however both underscore the decades long wisdom of how influential rates are on the real estate industry. October’s data showed a decline in sales volume, down by -14.6% from October 2022 and -4.6% from September.
The median sales price of an existing home boasted just a modest increase of +3.4% from a year ago. The inventory has risen from 3.3 months in October 2022 to 3.6 months, indicating that homes are spending more time on the market before finding buyers. The stagnancy in existing home sales continues to underscore the influence of higher rates, prompting sellers to stay put and buyers to avoid getting a new mortgage.
|ISM Manufacturing. November’s ISM Manufacturing Index clocked in below estimates at 46.7%, marking the 13th consecutive month of contractionary (sub-50%) readings and no change from October. Also noted in the survey, respondents said demand remained soft, suppliers continue to have excess capacity, and concerns over higher labor costs exist as well. Overall, the manufacturing industry appears to be intact still, however it has been showing cracks over the last year which holds the potential to slip into recessionary conditions.
Markets closed out November strong this week as equities rose alongside bonds. October PCE inflation data showed moderate inflation as expected, but consumer confidence remains low despite November’s slight increase in confidence as most consumers still believe in the possibility of a recession in the next year. Both new and existing home markets are weakening on higher rates, and the manufacturing industry continues to show some cracks. We look forward to continuing to monitor data as it rolls out.
In closing, we want to express our sincere gratitude to our valued readers and loyal customers for entrusting us with your financial well-being. Your continued support is the cornerstone of our success, and we are committed to serving you with the utmost dedication and professionalism. As we navigate the ever-changing financial landscape together, we encourage you to reach out to us if there have been any shifts in your risk tolerance or if you have experienced any material changes in your Investment Policy Statement objectives or constraints. Your financial goals are our top priority, and we are here to adapt and tailor our strategies to align with your evolving needs, whether they pertain to risk and return objectives or constraints such as time horizon, taxes, liquidity needs, legal issues, unique circumstances, or changes in your financial planning and retirement objectives. Your feedback and communication are essential in helping us ensure your financial success. Thank you once again for your trust and partnership with Synergy Asset Management. We look forward to continuing this journey together.
We appreciate your continued trust.
Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA
The information contained herein is general in nature. It does not take into account your particular investment objectives, financial situation, or needs. It is provided for illustrative or informational purposes only, and should not be construed as advice. Our advisors can meet with you to discuss your retirement plan.
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