November 2022 Market Commentary
In a year where we have continued to face serious challenges and economic short comings, we hope you were able to have an enjoyable Thanksgiving. Our family had an enjoyable restful holiday which included some Turkey and a nap. As we continue preparation for the continuing Holiday Season, we send you the warmest of holiday wishes and continued good health for everyone within your immediate circle of friends and family.
I have highlighted the financial story that is continuing to be written as everyone wrestles with a 24-month period in which we have seen a global pandemic, supply chain shortages, historical government fiscal spending, spiking inflation, and a Federal Reserve which is tightening monetary policy. Well, the storylines and chapters continue to unfold as we navigate the final days of this calendar year and this unmatched period in history.
During the month of November, we did get slightly better-than-expected inflation data, as measured by the consumer price index (CPI) for the month of October and a more dovish tone to the Federal Reserve. Remember that the Federal Reserve is hoping to reduce the pace of inflation by threading a needle by slowing the economy without stalling it completely out. The CPI data that was released during November showed a 7.7% increase from a year ago, which was slightly lower than the month prior. This data included core components of food and energy advancing at a slower pace along with a slowing housing market (existing sales and new start).
If we combine this information with the non-farm payroll figures which showed 263,000 jobs were added, which is the lowest job gain since April 2021, we might have possibly the beginning of a small crack in the inflation dam. Only time will tell.
Investors and the markets responded positively to these minimally better data points and equities pushed higher for the month. The best performing sectors were materials and industrials, and we have continued to see Large Cap Technology company’s flounder. Even with the minimally improving data, the S&P500 finished out the month with a +5.38% return and the Nasdaq finished up at +4.38%. The gains were truly realized during the last day of the month as FOMC meeting notes were released which revealed that most Fed Officials felt a slowdown in the pace of rate hike increases was appropriate. With this push up in November, this leaves the S&P 500 YTD performance at -14.39% and the lagging technology heavy Nasdaq Index YTD performance at -26.70%.
We will be watching for the November CPI data which is released on December 13th along with the 2-day Fed Meeting which concludes on December 14th.