U.S. stocks had the highest monthly rally of 2023 in November; the benchmark S&P 500 rose 9%, the tech-heavy Nasdaq Composite surged 11% and the Dow Jones Industrial Average climbed 2,900 points higher. The key news for investors in the past month was the November 14 release of the Consumer Price Index, revealing a 3.2% inflation increase in October, lower than anticipated.
Encouraging news from this Tuesday revealed that the November Consumer Price Index (CPI) increased by 3.1% every year, aligning with the predictions of economists surveyed by Reuters. Similarly, core prices, which exclude fluctuating items like food and energy expenses, also met expectations, rising by 4% annually.
This triggered a surge in speculation that the Fed has finished its tightening cycle. Most traders, as indicated by the CME Group’s Fedwatch tool, think that the central bank has raised interest rates for the last time this year, shifting their focus to potential rate cuts around mid-2024.
Policymakers And U.S. Stocks
Should that prediction materialize, there’s a strong likelihood that policymakers will attain their desired “soft landing” scenario, despite raising borrowing rates from nearly zero to approximately 5.5% within a mere 15-month timeframe. Growth has remained strong, and the unemployment rate is still hovering below 4% even as inflation has rapidly cooled.
The positive developments contributed significantly to driving the S&P 500 to its second most successful November since 1980 and it’s noteworthy to highlight that the only instance when the index performed better in November was during its recovery post the pandemic in 2020.
See Related: SlingTV Partners With BitPay To Accept Crypto For Subscriptions
Encouragingly, Bank of America’s Savita Subramanian anticipates ongoing positive momentum for the S&P 500, projecting it to reach a record-breaking 5,000 points by year-end. Additionally, both BMO’s Brian Belski and Deutsche Bank’s Binky Chadha have established price targets of 5,100 points each.
Analysts Index Review
However, certain analysts are expressing skepticism. JPMorgan Asset Management advises investors to remain cautious due to the possibility of a recession, while Société Générale cautions them to brace for a volatile 2024, predicting that the index will fluctuate between nearing its record high, experiencing a decline, and subsequently rebounding.
The focus of investors has shifted now to the conclusion of the Fed’s two-day meeting on Wednesday, eagerly awaiting their decision on interest rates, along with the release of the November producer price index (PPI) data. Jason Pride, chief of investment strategy and research at Glenmede, said:
“They’ve (Fed) already taken rates up a lot… they will keep rates up in that range for longer than what the market is currently expecting. Markets do not expect more hikes and are instead focused on rate cuts.”
