Hip. hip, hooray! Stock prices continue to rise, making November one of the best months for Wall Street. Retail investors net bought USD4.8B of cash equities, the highest weekly inflow recorded since April 2022. For the week, the S&P 500 advanced +1% and the Nasdaq Composite tracked +0.89% higher.
The S&P 500 is up over +7% for the month thus far, the Nasdaq is up over +9%, and even the Russell 2000 (small-cap stock index) has rebounded over +6%. The rally has taken on more of a parabolic look now, and that begs the question if this move has gone too far too fast.
Elsewhere, the US dollar fell against all the G10 currencies last week. The dollar-bloc currencies, sterling, and the Scandis led the move, appreciating by about +0.55%-1.40% against the US dollar. Let me add that it is not a surprise to expect the dollar to trade lower as the short end of the US curve starts to move lower ahead of Fed easing.
The 10-year Treasury yield was up very slightly over the last week. A move down to 4% seems quite reasonable. The belief that rates have peaked seems quite widespread now. Two of the most hawkish FOMC officials, who led the charge for higher rates last year, are getting comfortable with holding policy steady, backing expectations that the Fed’s hiking cycle is done.
Fed Governor Christopher Waller said Tuesday that he’s “increasingly confident” that monetary policy is now in the right spot to slow the economy and bring inflation back down to the 2% target. Governor Michelle Bowman also stopped short of endorsing an increase next month, conditioning the need for further hikes only on incoming data that indicate progress on inflation has stalled or is insufficient to bring inflation down to 2% in a timely way.
We survived the most aggressive rate-hiking cycle in a generation and all our risk positions have bounced back strongly this year. Call me crazy, I’m expecting better days next year. I always feel sorry for those retail investors who jump in and out of the market simply because someone told them to do so.