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November 2023 Monthly Market Update

November was a strong month for U.S. equities, with the S&P 500 finishing up 9%. The interest rate on the benchmark 10-year U.S. Treasury fell from the 5% recent high in October, ending the month at 4.35%. U.S. Bonds, as measured by the Bloomberg U.S. Aggregate Bond Index, realized their best monthly gains since 1985.

The key driver of the risk-on sentiment was further evidence of disinflation, underpinning falling rates, in combination with a “soft landing,” or moderate economic slowdown, narrative. In terms of inflation, the Consumer Price Index rose by less than forecast, with the annual rate of +3.2% the smallest increase since September 2021. The Personal Consumption Expenditures price index – the Fed’s preferred measure of inflation – showed prices +3% vs. a year ago, which was in-line with expectations.

In terms of employment, the Jobs Report showed the U.S. added 150K jobs (less than forecast); Initial Jobless Claims – the number of people filing for unemployment benefits for the first time – is beginning to tick up; and Continuing Claims – the number of people re-applying for unemployment benefits – is at its highest in two years. Cooling inflation and emerging evidence of a cooling labor market are supportive of the notion the Fed’s monetary tightening cycle is complete. Note “cooling” in the labor market is relative as, overall, the economy continues to add jobs at a nice pace, and real wages are rising.  

The market now anticipates the Fed may start cutting rates in the first quarter of 2024, with a currently projected 100% probability of a rate cut by the July 2024 meeting.

In other news, we’d be remiss not to mention the passing of an industry Great, Charlie Munger, at 99 years of age. Munger was Warren Buffett’s right-hand man and held the role of Vice Chairman of Berkshire Hathaway from 1978 until he died on November 28, 2023. Buffett himself credits Munger with instilling Berkshire’s modern-day investment philosophy – to buy great companies at a fair price – simple enough! Munger offered these words of wisdom regarding life and investing:

“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts. Slug it out one inch at a time, day by day, and at the end of the day – if you live long enough – most people get what they deserve.” – Charlie Munger

– Laura G. Andersen, CFA

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