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Market Recap – Week Ending 11/30/18

Stocks rebounded this week from the slump of the Thanksgiving-shortened trading week.  The S&P 500 index posted its best day in over 6 months on Wednesday, up 2.3%, and was up about 4.5% for the week.  Concerns about Federal Reserve interest-rate hikes and trade wars have eased, and markets were encouraged by Fed Powell’s comments on Wednesday that we are close to neutral in rates.

For the month, the S&P 500  gained approximately 2%. The MSCI EAFE index, a measure of developed international stock markets, was up about 1.5%, and the MSCI EM index led the way for the month, up about 4.5%.  These numbers are my estimates.  In bonds, we finished the month with the 2-year, 10-year and 30-year yielding 2.80%, 3.00%, and 3.30% respectively.  The yield on the 10-year improved 15 bp over the month from 3.15%, and the total return for the Aggregate index should come in at about 0.6% for the month of November.  The yield on the Bloomberg Barclays U.S. Aggregate Bond index has climbed to 3.55% from 2.71% at 2017’s end.

Powell and the Fed.  Fed Chair Jay Powell’s comments on interest-rate policy fueled a mid-week rally as investors concluded that the central bank is about done with hiking the fed funds rate. Chairman Powell stressed that policymakers will remain data-dependent to make necessary adjustments to keep the economy on an even keel.  Powell repeated his view that’s “there’s a great deal to like about the economic outlook.”  The key takeaway is that the market gained confidence that 1.  We are close to the end of rate hikes, and 2. The Fed is not looking to surprise the markets.  These are both market positives.  Having said that, expect one more hike this year at the December meeting.

Looking Ahead next week will have a full calendar of economic news to digest.  There is data on manufacturing and service sector activity, construction spending, car sales, factory orders, consumer credit, and employment.  In addition, we will see the Fed’s “Beige Book” (guess what color it is…) of regional economic conditions from around the nation.