The S&P 500 closed at 4,594.64 points on Friday December 2nd, 2023 to advance 0.77% for the week and notches its best close of 2023. A few reasons for the strong move in the broad market index this week, as Cyber Monday that followed last week’s Black Friday had set new records for consumer spending. On Wednesday, the second estimate of U.S. Q3 GDP growth was revised to 5.2%, surpassing the previous estimate of 4.9% and stronger than the rise of 2.1% in Q2. On Thursday, the Federal Reserve’s preferred inflation guage, core PCE advanced 3.5% Y/Y in October and cooling from September’s 3.7%, while PCE gained 3.0% in line with estimates and retreating from 3.4% in September. On Friday, Fed chair Jerome Powell was speaking at a fireside chat at Spelman College, and in his opening remarks he attempted to cool the market’s enthusiasm of rate cut expectations, saying it was too “premature” to conclude that monetary policy was sufficiently restrictive. However during the fireside chat, his replies to questions were much more positive and all but confirmed to traders that the central bank would not hike rates anymore.
The continued favourable economic data led investors to snapping up equities and bonds this week, driving Treasury yields lower and giving a boost to equities. The shorter term 2 year yield ended the week at 4.543%, while the longer term 10 year yield ended at 4.197%.
One of the best climbs out of correction in Nov 2023
S&P 500 is up 20.15% year-to-date as of Dec 1 close
Looking back, the S&P 500 enter correction territory on October 27, as news of the Israel-Hamas war dragged on for almost its third week, as price of brent crude oil hit a high of $92 per barrel for the week, sparking fears that inflation might tip back up and the Federal Reserve had to raises rates further. If as a retail investor, you had read all the bad news and sold at the bottom, you would have missed out on one of the best recoveries as the S&P 500 exited correction in the next 21 days on November 20. Year-to-date, the S&P 500 is now up 20.15% and just another 4.4% before it reaches all-time-high reached on January 3, 2022 close of 4,796.57!
Strategy for 2024
Meanwhile, my portfolio top performers have been Meta (up 107% from my cost price), Microsoft (up 43%), Salesforce (up 25%) and CME Group (up 25%). The bottom performers unfortunately are Alibaba (down 19%), JD.com (down 27%) and Estee Lauder (down 15%).
My strategy as we head into December and towards 2024 would be to look for discounts in healthcare & consumer staples stocks which have underperformed the market this year, while holding on to the winners as I’ve bought them at a significantly cheaper price late last year and early this year.
At the end of the day, as investors, your investment strategy should never depend on what the Federal Reserve does, whether they decide to cut rates in the second half of 2024 shouldn’t matter, instead look out for stocks that are of a wide economic moat and will be able to withstand its competition. Of course should a recession come in 2024, healthcare and consumer staples will help cushion the fall as the traders rotate into these risk-off sectors, and of course you should have money on the sidelines ready to buy the next “Great Stock Market Sales” which most investors would be fearful of!
$S&P 500(.SPX)$
Comments
With the S&P 500 up over 20% YTD, do you think there's still room for further gains or are we due for a correction soon?
Do you think the market's enthusiasm for rate cuts is justified or do you agree with Powell that it's too premature to conclude?
impressive gains for the S&P 500 this week! It's great to see the market responding positively to the strong economic data.