November 2022

by Michal Bobak on Dec 2, 2022

Monthly Market Summary

The S&P 500 Index returned +5.6% during November, outperforming the Russell 2000 Index’s +2.2% return.
Cyclical sectors outperformed during November, with Materials (+11.7%) and Industrials (+7.8%) the top two sectors. Energy (+1.3%) was the worst-performing sector as the price of oil declined -6.9%, followed by Consumer Discretionary (+1.5%), which was weigh down by Tesla’s underperformance.
Corporate investment grade bonds generated a +6.6% total return, significantly outperforming corporate high yield bonds’ +3.4% total return.
The MSCI EAFE Index of global developed market stocks returned +13.2%, underperforming the MSCI Emerging Market Index’s +15.6% return.

Market Trades Higher After Encouraging October Inflation Report

Stocks traded higher for a second consecutive month after another encouraging inflation report. Data showed the Consumer Price Index (CPI), which measures inflation, increased +0.4% month-over-month during October. While October’s +0.4% reading was a repeat of September’s +0.4%, it was below the market’s +0.6% estimate. Compared to October 2021, the CPI increased +7.8% year-over-year. It was the slowest annual pace of inflation since January 2022 and fourth consecutive month that the pace of inflation slowed from the prior month. Investors cheered the report as fresh evidence that price pressures are easing after a period of high inflation.

The top story in the bond market was falling Treasury yields as investors wagered that a drop in inflation will allow the Federal Reserve to slow its interest rate hikes. Bonds traded higher as interest rates declined, and the U.S. Bond Aggregate generated a +3.8% total return. The equity market also traded higher, and the S&P 500 followed up October’s +8.1% rally with another +3.6% gain during November. International stocks joined in on the rally and significantly outperformed U.S. equities as the U.S. dollar weakened. Overall, November was a strong month across asset classes.

Market Internals Highlight Broad Participation During November

A look beyond the S&P 500’s headline return reveals strong market breadth. Breadth measures underlying strength or weakness based on the number of stocks advancing or declining and can be used to analyze market trends. A rising index with strong breadth indicates a large group of stocks participated in the index’s rise, while weak breadth indicates fewer stocks participated. During November, eight out of the eleven S&P 500 sectors outperformed the broad S&P 500 index. In addition, 425 of the S&P 500’s 503 constituents traded higher during November. This data suggests investors are becoming more confident in the path forward. While it is encouraging to see such broad participation, markets will ultimately be looking for incoming economic data to support the latest rally.

IMPORTANT DISCLOSURES

Clare Market Investments, LLC is a Registered Investment Advisor. This material is for informational purposes only. It is not intended as and should not be used to provide investment advice and is not an offer to sell a security or a recommendation to buy a security. This summary is based exclusively on an analysis of general market conditions and does not speak to the suitability of any specific proposed securities transaction or investment strategy. Judgement or recommendations found in this report may differ materially from what may be presented in a long-term investment plan and are subject to change at any time. This report’s authors will not advise you as to any changes in figures or views found in this report. Investors should consult with their investment advisor to determine the appropriate investment strategy and investment vehicle. Investment decisions should be made based on the investor’s specific financial needs and objectives, goals, time horizon and risk tolerance. Except for the historical information contained in this report, certain matters are forward-looking statements or projections that are dependent upon risks and uncertainties, including but not limited to such factors and considerations such as general market volatility, global economic risk, geopolitical risk, currency risk and other country-specific factors, fiscal and monetary policy, the level of interest rates, security-specific risks, and historical market segment or sector performance relationships as they relate to the business and economic cycle. See claremarket.com for additional information and disclosures.

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