Key Highlights
- The S&P 500® was up 5.38% in November, bringing its YTD return to -14.39%.
- The Dow Jones Industrial Average® gained 5.67% for the month and was down 4.81% YTD.
- The S&P MidCap 400® increased 5.95% for the month, bringing its YTD return to -9.30%.
- The S&P SmallCap 600® was up 3.98% in November and had a YTD return of -11.31%.
Market Snapshot
It was a Thanksgiving of hope, specifically that the Fed would see the “weaker” economy and pull back on its interest rate increases, and one of joy, as the S&P 500 was up 5.38% for November and up 14.06% from the Oct. 12, 2022 low. We remained in awe by the turkey, with the S&P 500 down 14.39% YTD (after a 2022 opening day high), and we overstuffed ourselves, as inflows again picked up, even as the U.S. underperformed in November: the U.S. was up 5.08% compared with the global non-U.S., which was up 11.12%; but before you move abroad, note that the three-year U.S. return was up 27.71% and the global non-U.S. return was down 1.53%).
Black Friday, the day when retail turns its fiscal year to black from red, returned with its usual sales. Not that they were needed, given that consumers were still spending (just more selectively), but stores needed to incentivize specific merchandise, which fell out of sync (delayed deliveries, prior unmatched orders). As for my shopping indicator, my wife and daughter ventured out for their 18th Black Friday expedition (continuing their 10 a.m. start in SoHo—gone are the days of 5 a.m. lines for Macy’s in Midtown). According to them (and their charge slips), both crowds and sales were better than last year, but not better than pre-COVID-19 times, and the deals (from their discussions) were expected to get better. As for the “official” numbers (from store associations and charge card companies), sales increased 2.3% to a record USD 9.1 billion, but given inflation, the record was due to higher prices, not more unit sales. As for Cyber Monday, initial reports had sales at USD 11.6 billion, up from 2021’s USD 10.7 billion (which was down 1.4% from 2020).
As for December (and the hoped-for Christmas rally), the lame duck Congress needs to get to work. Needing to be finished this year is a spending bill, which includes defense spending, unless the government partially shuts down on Dec. 16, 2022. At this point, there is a bipartisan need to pass a bill. A stalemate slows the economy—which helps the Fed but hurts corporate earnings and the economy. A separate fix is needed to extend Medicare payments, which are due to be cut, as some (Democrats) may push for increasing the debt ceiling (currently USD 31.4 trillion; the S&P 500 market value is USD 34.3 trillion), but that one seems unlikely. From a stock view, the focus is on extending some of the 2017 Trump tax cuts that are due to expire (corporate tax relief), which would cost an estimated USD 100 billion in 2023; corporations are lobbying for the extension (the key components are the write-off of research & development and the limits on deducting interest expenses). The EU’s Dec. 5, 2022, ban of Russian crude (and Feb. 5, 2023, ban of oil products) has already shifted Russia’s exports to China, India and Turkey; prior to the Russia-Ukraine conflict, the EU accounted for half of Russia’s oil exports. OPEC+ will meet the day before that ban, on Dec. 4, 2022.
