It’s hard to imagine we’re coming up on another year end. It also feels like it’s been a long time since I last wrote a commentary (September). Part of the reason was that the markets continued trending upward, fueled by signs of cooling inflation, which led to a second consecutive 0.25% cut by the Federal Reserve of its benchmark interest rate in October. The other (big) reason was a significant family milestone: taking our oldest, Isabella, to New York for school where she is now pursuing her passion and gifting in the performing arts. Nicole and I are very proud of her.
Market Commentary
As of this writing (Nov 17), the stock market just came off a week with mixed results, with investors responding to comments from the Federal Reserve that reduced hopes for a rate cut in December, along with concerns about elevated valuations in the tech sector and a forming AI bubble. This came after optimism earlier in the week over a possible end to the longest-ever government shutdown, which has now ended after a record-breaking 43 days, boosting the markets early in the week.
But the optimism was stifled after “hawkish” comments by the Federal Reserve lowered expectations for a December rate cut, causing declines in growth stocks. (“Hawkish” describes a monetary policy stance primarily concerned with controlling inflation, typically by raising interest rates – or in this case, conversely, a reluctance to lowering rates).
What I found interesting was that just last week (Nov 11) during our monthly firm-wide meeting to review October’s monthly and year-to-date performance, one of the slides was titled, “Will we ever get a correction?” Considering the broad market indices like the S&P 500 had seen an increase of approximately 38% through October since April’s lows (before the V-shaped recovery), the current stock market pullback is largely considered a healthy and necessary reset after an extended period of gains and stretched valuations, with many even saying it was anticipated. And as of today, the VIX Index, which measures the 30-day expected volatility in the S&P, has risen and currently sits in the “moderately elevated” zone (22), which is above the long-run historical average of around 21. For reference, a VIX below 20 is deemed low volatility. Could this recent stock market be viewed as the potential start of a healthy market pullback or the reset that was expected? Possibly.
As I wrap up, while it’s easy to get caught up with the recent market activity, keep in mind that the S&P 500 continues to stay within its upward trend channel despite showing signs of weakening recently. Additionally, we have now just entered the period – November through April – that has historically produced the strongest market performance. However, it is important to note that past results do not guarantee future outcomes, as market conditions or unexpected events can differ significantly each year. The good news is that our clients have a way to navigate this ever-changing market environment. Through active management, our clients’ accounts can stay flexible and responsive no matter how the market performs.
We’re always here to answer your questions or provide guidance, and you can reach out to us at any time. We look forward to seeing you at our next review or in our next newsletter!
