Weller Group Week ending 11/3/2023

Presented by Weller Group

Markets Monday 10/30 through Friday 11/3

• The S&P 500 increased +5.85% to close at 4358.34.  All 11 market sectors were positive.
• Oil prices dropped from $84.21 to $80.89 per barrel.
• More than 80% of companies have announced earnings for the third quarter (Q3), and more than 80% of those companies had surpassed analyst expectations.  The bulk of remaining earnings announcements will occur over the next two weeks.  

Economic news

• Perhaps surprisingly, the market continued to rally on Friday 11/3 despite a monthly jobs report of fewer jobs being created than what analysts had predicted.  Over the past few months, positive economic news has often caused negative stock market performance…and negative (or if not negative, at least not-as-good-as-anticipated) economic news has helped fuel stock market rallies.  Why is this?  If we have economic news that is too good, the Federal Reserve (Fed) might increase rates.  However, if we have “soft” or “not as good as expected” economic news, the Fed will be less likely to increase interest rates.  
• Note that much of the economic data over the past few months has been positive, yet the stock market was not positive most of the past few months.
• Conclusion:  Despite what might be concluded from looking at stock market results, the aggregation of economic data over the past several weeks paints a picture of a resilient U.S. economy.

Fed

As widely expected, the Fed did not change the Federal Funds rate at their 7th FOMC meeting of the year last week. Recall that while the Fed cannot directly control the interest rates (i.e. yields) on investment products, the Fed indirectly influences such yields.  The Fed has one meeting left this year (Dec 12-13) and the consensus seems to be the Fed is done with increasing rates. www.federalreserve.gov/monetarypolicy/fomccalendars.htm 

Yields

• 1.62% is the current yield of the S&P 500.  Not to be confused with total return, the yield of a stock is the dividend payment divided by stock price.  The gain or loss of a stock is measured by the increase or decrease of stock prices.   Total return is the stock dividend yield plus stock price gains minus stock price losses.
• 4.56% is the current yield of the 10-year Treasury bond.  Although there are thousands of bonds, the 10-year Treasury is widely accepted as a benchmark to use as an indicator of bond yields.  As recently as 10/30/23, the 10-year yield was over 5%.   As of 7/31/23, the yield was 4%.   Note the significant changes in yield in just three months.
• The disparity – and fast-moving change – in yields can lure investors to move money between stocks and bonds to chase higher yields.  This phenomenon played a significant part in the fluctuation of stock and bond prices over the past few months of 2023. 

Weller Group is located at 6206 Slocum Road, Ontario, NY 14519 and can be reached at 315-524-8000. Advisory Services offered through Commonwealth Financial Network®, a Registered Investment Adviser.