What happened in November?
Aside from the pre-election decline, U.S. equities advanced throughout the month of November. Small and mid-cap stocks in particular jumped forward on the eve of and then again after Donald Trump won the presidential election. The SP 500 Index gained on almost 70% of the trading sessions since Nov. 9th, and ended the month +3.7%, and YTD +9.9%. (You can read our post-election market commentary by clicking here.) International equities did not fare as well in November with the ACWI ex-U.S. moving -2.3% and now sits +1.9% YTD.
Moving into December
Macroeconomic and technical indicators, which remained bullish throughout November, have now been complemented by increasing sentiment surveys. Although the monthly gain in equities pushed valuations to short-term highs amid increasing interest rates in fixed income, as a whole, market indicators point towards a U.S. and international market likely to move positive in the short-term with some elevated risks. We enter December with an 85% U.S. investment level. In our international strategies, we maintained a bullish posture throughout the month and remain 99% invested.
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Valuation U.S. stock valuations rose to their highest level in years providing some caution when entering new positions. At the same time interest rates are signaling a potential bottom.
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Macroeconomic U.S. income and household spending advanced in October for the 2nd straight month. GDP growth increased to a 3.2% annual pace, the highest in two years. Corporate profits increased for the 3rd straight month. |
Sentiment Investors flocked to equity funds (SPY) in November, increasing flows at +3.6%. Short interest also declined with the UM Consumer Sentiment survey at its highest level since May 2016. |
Technical Relative strength increased as the S&P 500 Index ends the month 2% above the 50-day moving average and 5% above the 200-day. After an early spike, Volatility (VIX) retreated to near-year lows. |