November Market Review: Navigating Volatility & Emerging Opportunities

In November, equity markets recouped some of the losses from October. Headline returns for the month understate choppiness along the way. Steep losses in select high-momentum tech stocks indicate that long-standing trends are being tested. Increased sector diversification, relative to capitalization weighted indices like the S&P 500, has been valuable during recent down moves, and we believe it will continue to be important.

Trade Conflict & Central Bank Policy Provide Cause For Optimism

Focus remained on trade conflict and central bank policy, and both topics provided cause for optimism. Fed Chairman Powell said that rates are “just below” neutral, in contrast to an earlier statement that described them as “a long way” from neutral. A December rate hike remains widely expected, but expectations have shifted to only one 0.25% hike for 2019 as opposed to two or three at the start of November. As a result, bonds gained in November, but the US Aggregate Bond market remains down about 2% for the year.

Impact of Trade Conflict With China Remains Unknown

Hopes for a thaw in the trade conflict with China grew. After a widely anticipated meeting between the presidents of the two nations at the G-20 summit in Argentina, a cease-fire of sorts was announced. Stocks initially rallied, then quickly retreated. The path ahead remains unclear. Relations with China, of which trade is just one piece, will be a long and complicated road. In the short term, global equity markets will continue to react to new developments with the understanding that further breakdown in trade with China would create a significant headwind for global economic growth.

S&P Earnings Grow; Apple Stumbles

Meanwhile, S&P 500 earnings grew over 25% in Q3, making stocks more attractive on a valuation basis. While some estimates claim about half of that growth was attributed to tax cuts, companies continue to innovate and grow. While the results were exceptional, they appear to have been widely expected, as strong results were often rewarded lightly while misses were punished more significantly.

Apple, often viewed as a symbol of this bull market, experienced a rare stumble in November. Numerous reports suggesting lower iPhone demand trickled in, sending shares down 18% for the month. We don’t have a specific forecast for Apple, but we’re reminded how tough it is to be at the top and that no company should be considered risk-free.

After a relatively quiet few months, Bitcoin fell 36% and dropped below $4,000. We continue to avoid speculative trends and focus on helping our clients achieve personalized long-term retirement goals by diversifying within core asset classes.

For additional resources, read our free “Investor’s Guide to Volatile Markets.”