Fresh record highs were set in November as U.S. and international stock indices once again posted gains for the month. The S&P 500, Dow Jones Industrial Average, NASDAQ, Russell 1000, Russell 2000, and Russell 3000 each hit all-time highs as the post-election rally continues. Large cap stocks, as measured by the S&P 500, have increased every month since the election and are now up nearly 24% over that period. The S&P 500 increased 3.1% for the month. Small cap stocks, as measured by the Russell 2000, increased by 2.88%. Growth stocks increased 3.02% and value stocks increased 3.05%. International stocks increased at a more modest pace during November, with developed international stocks, as measured by the MSCI ACWI ex US Index, increasing 0.84% and emerging market stocks increasing by 0.21% for the month.

Bonds had a challenging month in November. The yield curve flattened as interest rates increased for bonds maturing in less than 10 years and decreased for bonds maturing in more than 10 years. The yield on the benchmark 10-year Treasury decreased 1 basis point to 2.37% during the month. As expected, the Federal Open Market Committee (FOMC) left rates unchanged at its two-day meeting that concluded on November 1st.The last FOMC meeting of the year is scheduled for December 12 to 13 and currently fed funds futures appear to be indicating a near certainty of a rate hike at that meeting. Jerome Powell was appointed to succeed Janet Yellen as Chairman of the Federal Reserve. Powell has a record of voting in line with Yellen, so it is expected that the current slow pace of rate increases will continue under his leadership. The Bloomberg Barclays Aggregate Bond Index decreased by 0.13% for the month as Treasuries and investment grade corporates decreased by 0.14% and 0.15%, respectively. High yield bonds declined 0.26% and municipals decreased by 0.54%.

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EQUITY MARKETS

Stocks continued their relentless march higher during November. Fresh record highs were set once again for the major U.S. stock indices, including the S&P 500, Dow Jones Industrial Average, NASDAQ, Russell 1000, Russell 2000, and Russell 3000. The S&P 500 has increased nearly 24% since the election, driven by solid earnings growth and some hope for income tax reductions. The S&P 500 has now gone over a year without even a correction of 3%, which is a new record. November’s equity rally was remarkably balanced, with growth and value stocks up similar amounts and large cap stocks just nosing out small cap stocks for the month. International stocks, both developed and emerging, trailed their large cap U.S. counterparts.

FIXED INCOME MARKETS

The yield curve continued to flatten as yields increased for bonds maturing in less than 10 years and decreased for bonds maturing in 10 to 30 years. The yield on the 10-year Treasury decreased one basis point in November to 2.37%. The Bloomberg Barclays Aggregate Bond Index posted a modest decrease in value for the month. Treasuries, investment grade corporates, high yield, and municipals all posted losses.

ECONOMIC DATA

The economy continued to grow at a solid pace in October. The labor market had a nice recovery from last month’s weakness as 261,000 new jobs were added. This is the strongest job growth since July of 2016. Unemployment ticked down to 4.1%, the lowest since September of 2000. Both the ISM Manufacturing Index and ISM Non-Manufacturing Index continue to show economic growth. The estimate of third quarter real gross domestic product was nudged up to 3.3%. The housing market continued to expand. New permits were the second highest since June 2007 and new home sales were the highest since September 2007. As expected, the Federal Open Market Committee (FOMC) left rates unchanged at the conclusion of its two-day meeting on November 1st. The last FOMC meeting of the year is scheduled for December 12 to 13 and currently fed funds futures appear to be indicating a very high probability of a rate hike at that meeting. Jerome Powell was appointed as the next Chairman of the Federal Reserve. If confirmed, it is likely that Powell will continue with the modest pace of interest rate increases started by his predecessor, Janet Yellen.

Event Period Estimate Actual Prior Revised
Nonfarm Payroll Oct 313,000 261,000 -33,000 18,000
Unemployment Oct 4.20% 4.10% 4.20%
ISM Manufacturing Oct 59.5 58.7 60.8
ISM Non-Manufacturing Oct 58.5 60.1 59.8
Retail Sales ex Auto & Gas Oct 0.30% 0.30% 0.50% 0.60%
PPI MOM Oct 0.10% 0.40% 0.40%
PPI MOM ex Food & Energy Oct 0.20% 0.40% 0.40%
PPI YOY Oct 2.40% 2.80% 2.60%
PPI YOY ex Food & Energy Oct 2.20% 2.40% 2.20%
CPI MOM Oct 0.10% 0.10% 0.50%
CPI MOM ex Food & Energy Oct 0.20% 0.20% 0.10%
CPI YOY Oct 2.00% 2.00% 2.20%
CPI YOY ex Food & Energy Oct 1.70% 1.80% 1.70%
Industrial Production Oct 0.50% 0.90% 0.30% 0.40%
Housing Starts Oct 1,190,000 1,290,000 1,127,000 1,135,000
Building Permits Oct 1,250,000 1,297,000 1,215,000 1,225,000
New Home Sales Oct 628,000 685,000 667,000 645,000
Existing Home Sales Oct 5,400,000 5,480,000 5,390,000 5,370,000
Leading Index Oct 0.80% 1.20% -0.20% 0.10%
Durable Goods Orders Oct (P) 0.30% -1.20% 2.00% 2.20%
S&P CoreLogic CS 20-City YOY Sep 6.04% 6.19% 5.92% 5.82%
Personal Income Oct 0.30% 0.40% 0.40%
Personal Spending Oct 0.30% 0.30% 1.00% 0.90%
GDP Annualized QOQ 3Q (S) 3.20% 3.30% 3.00%
Univ. of Mich. Sentiment Nov (F) 98 98.5 97.8
P = Preliminary, S=Second, F = Final
Source: Bloomberg

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