Market Commentary: November 2023

Big Picture

Thanks to positive economic data fueling expectations that the Federal Reserve has successfully defanged inflation without sending the economy into a recession, surging optimism that the Fed is done hiking rates spread across markets in November. U.S. stocks posted one of the best Novembers since the 1980s, while a plunge in yields helped bond markets rally to finish with one of the best months since 1985. Meanwhile, despite OPEC+ deepening its production cuts to keep oil prices firm, a surplus of production in the United States has helped drive oil and gasoline prices down. 

Morningstar performance returns as of november 30 2023


 Equity markets rebounded from a rough October to post a sensational November. 

  • The S&P 500, Dow, and NASDAQ all advanced over 9%.
  • Global stocks had one of their biggest monthly rallies in three years. International Developed Markets were up over 9%, and Emerging Markets were up 8%.
  • Information Technology led all sectors, with Energy the only sector in the red.
  • Precious metals were up, while commodities like corn have tumbled to three-year lows.1 

Fixed Income

 Bond prices surged as yields dropped, driving the best monthly performance for bond markets in nearly four decades.

  • The yield on the 10-year Treasury note plunged from almost 5% in October to 4.27% by the end of November.
  • The Bloomberg U.S. Aggregate bond index, a widely tracked measure of total returns on U.S. fixed income, posted its best month since 1985.
  • International debt followed U.S. markets, and the Bloomberg Global Aggregate bond index posted its best month since the financial crisis in 2008.2


Equity risk factors participated in the upswing in markets on an absolute basis. On a relative basis, when compared to the general market, Momentum was a slight outperformer in the United States, Momentum and Quality outperformed in International Developed markets, and Size and Quality exceeded in Emerging Markets.3 


News Impacting Markets

The Economy, Inflation & the Fed

Recent economic data suggest the economy is slowing, as U.S. consumer spending, inflation, and the labor market have all cooled. 

Inflation has significantly slowed down this year, suggesting that the Fed may end its interest rate increases. Price growth, as measured by the personal consumption expenditures price index (the Fed’s preferred inflation gauge), remained mild in October. Headline PCE fell to an annualized rate of 3% from 3.4% in September, while the “core” personal consumption expenditure index, which excludes volatile items, decreased to an annualized rate of 3.5% in October, down from 3.7% in September, reaching its lowest point in over two years.4

US Consumer Spending, Inflation Slowdown october pce reading pointed to cooling economy - from Bureau of Economic Analysis

Federal Reserve Chair Jerome Powell suggested that the U.S. central bank might have completed its rate hikes, the most aggressive tightening cycle in four decades after the FOMC voted to keep interest rates unchanged for the second consecutive policy meeting in early November.

2024 Prognostications

It’s that time of year on Wall Street when economists and analysts do their best to predict what lies ahead in the next year. The ritual publications of Wall Street forecasts offer insights into widely held views on expectations. 

Consensus opinion points to a slowdown in the economy and inflation in 2024, with the possibility of the Fed cutting rates by the end of the year. Futures suggest that traders don’t see strong chances of a cut in January, but they have priced in a 48% chance of a quarter-point reduction in March. A month ago, those odds were at 14%.5

Opinions about what this means for stocks and bonds diverge sharply, but most analysts are projecting a flat muddle-through year. 

It’s important to note that these predictions may not necessarily turn out to be accurate. They are more often wrong than right. Recall that heading into 2023, the average forecast called for the S&P 500 to decline (it’s up over 20%).

Yet, it’s worth noting that some of the most pessimistic predictions stemmed from valid expectations: the Fed’s unexpectedly aggressive actions caused yields to skyrocket to unprecedented levels. Surprisingly, the anticipated recession never materialized, corporate profits remained solid, and U.S. consumers continued to spend. Also, the explosive growth of artificial intelligence (AI) sparked a new wave of excitement for tech companies that powered stock prices higher.

This points to the exceedingly tricky challenge of successfully predicting the course of economic events—and successfully predicting how markets will respond to those events. Investors are better served to build portfolios based on long-standing empirical evidence and avoid crystal ball gazing.

In the words of the late Charlie Munger, “Knowing what you don’t know is more useful than being brilliant.”


Final Thoughts

The dominant story of the last several years has been the impact of COVID. We’ve experienced the fallout of a once-in-a-century pandemic everywhere across the economy, all around the world. The fading of the initial shock explains the initial inflation surge, which resulted in aggressive central bank action that has roiled markets. 

We look forward to turning the page as the economy (and markets) settle into something resembling normality in the new year.

Wishing you health and happiness this holiday season.



1 Morningstar Direct as of November 30, 2023
2 Morningstar Direct as of November 30, 2023
3 Morningstar Direct as of November 30, 2023
4 Saraiva, A., “U.S. Consumer Spending, Inflation Slow in Sign of Cooling Economy,, November 30, 2023, 
5 CME FedWatch Tool

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