Pop the Champagne? | Nov. 3, 2023

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS:   S&P 500, NASDAQ, FRB, Rates, Earnings

Pop the champagne, a rally has begun! Is it sustainable or should there be reason for concern on the horizon?

Monday                       S&P 500 1.20% | NASDAQ 1.16%

There was little economic data released on Monday. There were 14 earnings calls with four of those missing expectations. In all, Markets rallied on the day. All 11 sectors of the S&P 500 finished in the green. This may have just been a bounce from the hemorrhaging that occurred last week.

Tuesday                       S&P 500 0.65% | NASDAQ 0.48%

Markets continued the rally from the previous day. The Federal Reserve Board (FRB) began their two-day meeting. They are expected to hold rates steady, but the wording will give guidance on future expectations. Are they done raising rates, is this just a pause, and are rate cuts coming soon. While it was a good day on the market, it was not enough to recover for the month. The S&P 500 ended the month down 2.20%.

Wednesday                 S&P 500 1.05% | NASDAQ 1.64%

The FRB rate decision swayed markets to the north. They paused on rates, not leaving anything off the table for future needs based on inflation. It may be that we just saw the peak of the hiking cycle. If that holds true a rally could ensue from here. The problem is that a rally would provide for looser financial conditions… Increasing the need for future FRB rate hikes…

Thursday                     S&P 500 1.89% | NASDAQ 1.78%

The rally from Wednesday’s FRB decision continued on Thursday. Corporate earnings also lent a helping hand to performance. The earnings season has been beating long-term averages thus far. This is not surprising, given the robust GDP reading from the third quarter.

Friday                          S&P 500 0.94% | NASDAQ 1.38%

Happy Jobs Friday! The job market slowed in October, adding only 150K jobs rather than the 170K expected. You would think this would yield a soft stock market, but on the contrary, markets took off. The weakness in the job market supports the idea that the FRB may not have to raise rates further. This led to lower rates on the bond market (higher prices) and a rally in equities.

Conclusion                  S&P 500 5.85% | NASDAQ 6.61%

What a week, markets grew substantially! There needs to be a cautionary tone to this growth. The FRB feels higher rates that have materialized on the back of the curve help justify a pause in hikes. The current rally in equities, and likewise bonds, means that interest rates have tamped back down. If we do not see material degradation of jobs and inflation, then the FRB will just resume rate hikes. Something no one desires to see in the long run.

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
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