Monthly Market Insights | November 2021
A strong corporate earnings season renewed investor enthusiasm for stocks and propelled the market to healthy gains in October.
The Dow Jones Industrial Average advanced 5.84 percent while the Standard & Poor’s 500 Index rose 6.91 percent. The Nasdaq Composite led, surging 7.27 percent.1
Powerful One-Two Punch
After a difficult September, the markets rallied with a sense of conviction thanks to a string of positive economic reports and a strong start to earnings season.
The encouraging succession of economic reports allayed investor worries about inflationary pressures and economic deceleration, while a wave of corporate earnings releases provided fresh upside surprises that suggested that American businesses had weathered the worst of the Delta variant surge.
Inside the Number
With about half of the S&P 500 constituent companies having reported earnings, more than 80 percent of them have beaten Wall Street analysts’ consensus estimates. Based on these results so far, earnings are expected to come in approximately 39 percent above the third quarter last year.2
Nearly lost in October’s rally were two important developments. First, the FOMC (Federal Open Market Committee) detailed the expected size and pace of its bond market tapering. Despite the step toward a less accommodative monetary policy, investors greeted it with a collective shrug.
Tax Uncertainty Lifting
Second, the market appeared to look past the possibility of a change in corporate tax rates to help pay for the proposed social and climate spending bill. As legislators narrowed the range of the spending bill framework, the prospect of higher corporate taxes dimmed, which may have provided an additional lift to stock prices.
Every industry sector moved higher in October except Communications Services, which saw a marginal loss of 0.47 percent. Performance was strong across the board, with gains in Consumer Discretionary (+10.05 percent), Consumer Staples (+2.66 percent), Energy (+9.38 percent), Financials (+6.09 percent), Health Care (+3.64 percent), Industrials (+4.69 percent), Materials (+6.00 percent), Real Estate (+7.84 percent), Technology (+6.81 percent), and Utilities (+5.90 percent).3
What Investors May Be Talking About in November
In the month ahead, expect news events from Washington to continue to drive some market activity. One issue that may make headlines is the federal debt ceiling, which is expected to be resolved before early December.
Raising the debt ceiling will allow the federal government to pay its bills, including interest payments on Treasuries and government programs.
But the markets might get unsettled the closer the debt ceiling deadline approaches without a legislative agreement. Uncertainty represents a risk that can manifest itself in price volatility.
Many overseas markets followed Wall Street’s lead, with the MSCI-EAFE Index gaining 3.21 percent in October.4
Major European markets performed well, with advances in France (+4.76 percent), Germany (+2.81 percent), and the U.K. (+2.13 percent).5
Pacific Rim stocks were mixed, with the Hang Seng market adding 3.26 percent while the Nikkei slipped 1.90 percent.6
Gross Domestic Product (GDP)
Economic expansion slowed in the third quarter, as the GDP grew at an annualized rate of 2.0 percent. The spread of Delta variant and supply chain bottlenecks were the chief reasons for the slowdown from previous quarters.7
The economy added 194,000 jobs, making September the slowest month for job growth this year. The unemployment rate declined to 4.8 percent, while wages rose 4.6 percent year-over-year.8
Retail sales rose 0.7 percent, despite constrained supply and the Delta variant. The better-than-estimated sales in September may reflect consumer strength and higher prices for goods.9
Industrial output fell 1.3 percent, a downside surprise from consensus expectations for a small gain. The Federal Reserve attributed about half the decline to the continuing impact of Hurricane Ida.10
Burdened by a shortage of materials and labor, housing starts dropped 1.6 percent in September, dragged lower by a decrease in multi-family dwelling starts.11
Existing home sales rose 7.0 percent. The median price of existing homes increased by 13.3 percent from a year ago to $352,800.12
New home sales gained 14 percent, reaching a six-month high. The combination of low inventory and high demand led to an 18.7 percent rise in the median cost of a new home.13
Consumer Price Index (CPI)
Consumer prices rose 0.4 percent in September, while over the last 12 months the inflation rate came in at 5.4 percent.14
Durable Goods Orders
Durable goods orders declined 0.4 percent, lower than economists had forecasted amid labor and supply shortages.15
Minutes from September’s FOMC meeting revealed greater details surrounding the Fed’s taper plans. The Fed would begin reducing bond purchases by $15 billion a month starting in November and concluding in July 2022.
"No decision to proceed with a moderation of asset purchases was made at the meeting, but participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate," according to the minutes of the two-day meeting, which concluded on September 22.16
This tapering schedule is a bit accelerated from what investors had been expecting but reflects Fed worries that supply chain bottlenecks were increasing the likelihood of more persistent inflation.17
By the Numbers: National Entrepreneurship Month
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
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The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark for the performance in major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
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2. CNBC.com, October 28, 2021
3. Sectorspdr.com, October 31, 2021
4. MSCI.com, October 31, 2021
5. MSCI.com, October 31, 2021
6. MSCI.com, October 31, 2021
7. WSJ.com, October 28, 2021
8. WSJ.com, October 8, 2021
9. CNBC.com, October 15, 2021
10. CNBC.com, October 18, 2021
11. Reuters.com, October 19, 2021
12. WSJ.com, October 21, 2021
13. CNBC.com, October 26, 2021
14. WSJ.com, October 13, 2021
15. WSJ.com, October 27, 2021
16. FederalReserve.gov, October 13, 2021
17. WSJ.com, October 13, 2021
18. Forbes, November 1, 2020
19. Finances Online, April 29, 2021
20. FranFund.com, November 25, 2019