The S&P 500 Index just turned in one of the best performances for November.
Since 1954, only 5 times has November returned north of 8%. This year, the S&P was up 8.9% in November. Historically speaking, markets are usually ahead of the curve when it comes to recessions. When we look back at the 2008 Financial Crisis, the ratio of Discretionary stocks out-performing Staples had plummeted 21% from June to December of 2007 - i.e., 5 months prior to the recession beginning. Similarly, from April of 2019 to December of 2019, the ratio had declined 6% prior to the beginning of the recession that resulted from COVID. Yet this year, we can see a resurgence in the ratio. Consumer Discretionary stocks are out-pacing Consumer Staples and that ratio has risen 36% since bottoming in December of last year.
Equity performance is broadening away from the "Magnificent 7" stocks, which is a good thing.
If we look at the S&P 500 Index (generally representing large cap stocks), the benchmark has been out-performed by IWM (the ETF representing the Russell 2000 Small Cap Index) since the market bottomed on October 27th. The same can be said of Mid-caps, as that group of equities has out-paced the S&P 500 by more than 200 basis points on the upside. On the economic front, Building Permits were higher in October and have risen for three consecutive months. Construction Spending for October tripled the rate of the previous month and has increased in 8 of the last 10 months. The consumer continues to show resilience as Redbook Sales were higher last week, nearly doubling the previous week's reading, thanks to Black Friday and Cyber Monday sales that were higher year-over-year. With volatility as such low levels, we could see a slight pullback at these levels before the year-end "Santa Rally."
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Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
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