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Reflecting on a Memorable November: Insights and Outlook

Reflecting on a Memorable November: Insights and Outlook

December 07, 2023

This November brought significant gains for both stocks and bonds, creating an unforgettable month for investors. As the financial markets continue to surpass expectations, I'm reminded of the wise words of Charlie Munger, Warren Buffett’s esteemed partner and a legendary investor, who we sadly lost last week: “The world is full of foolish gamblers, and they will not do as well as the patient investors.”  This sentiment resonates deeply with us. The rewards reaped by patient investors in 2023 are a testament to this philosophy and a trend we anticipate continuing.

The growing belief in a gentle easing of the U.S. economy has shifted attention from rising interest rates to the likelihood of cuts. This shift is lowering long-term interest rates, thereby encouraging investors to value stocks more favorably in terms of expected earnings.

A promising start to the holiday shopping season has bolstered the narrative of a smooth economic transition. According to Adobe, online sales have increased by 5% since Black Friday compared to last year. Factors like reduced gas prices, declining costs of goods, increased stock values, and higher wages are expected to maintain this positive momentum.

In terms of inflation, a crucial element of the economic balancing act, we're moving steadily towards the Federal Reserve’s 2% target. The core personal consumption expenditures (PCE) deflator, a key measure of inflation, has shown a remarkable slowdown, increasing at just a 2.2% annualized rate in the past three months, a significant drop from the 5.3% rate in the preceding year.

Looking ahead, the strong fundamental backbone of corporate America combined with the boost from lower interest rates lays the groundwork for further stock market gains in the upcoming year. A slowing economy will contribute to tempering inflation, which in turn supports more stable interest rates. Additionally, following a stellar third-quarter earnings season, we're entering an optimal period for earnings.

Of course, there are risks on the horizon. The full impact of higher rates is yet to be seen, consumers are depleting their surplus savings, the cost of U.S. government debt is rising, and international conflicts are escalating geopolitical tensions – all ahead of what promises to be a contentious 2024 U.S. presidential election.

However, echoing Munger’s advice, patience in investing is likely to be rewarded. While the precise outcome for the rest of the year remains unknown, historical trends suggest that stocks tend to yield above-average gains in December and are more likely to rise than fall, even following strong performances in the previous month. This would be a fitting conclusion to what has been an extraordinary year.

I welcome any questions you may have, so please feel free to reach out to me.









Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of December 5, 2023.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

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