Hello everyone, we are seeing momentum carry price action across all indexes to new record highs while a shift is currently underway from Growth to Cyclical and Value asset classes. Get our take on the current market environment and price action below.
• Stocks reached further into record territory, with all of the major indexes touching new intraday highs by Friday…on the first trading day of this past week the DOW closed out Nov with its best monthly performance since 1987, while the small-cap Russell 2000 Index registered its best monthly gain since its inception in 1978…Rising hopes of the coming COVID Vaccines and for a new round of fiscal stimulus appeared to boost market sentiment…however, surging Covid-19 cases, hospitalizations, and deaths have led to softer Q4 GDP growth forecasts… The Atlanta Federal Reserve’s model for predicting GDP, called GDPNow, is predicting an 11.1% annualized growth rate for Q4, which is a strong improvement from the 2.2% rate predicted just a month ago.
• On the Economic data front, the economy was slowing, which paradoxically may have supported stock prices by bolstering stimulus hopes…Stocks rose Friday after Oct nonfarm payrolls missed consensus expectations by almost half, rising by only 245,000, the slowest pace of monthly jobs growth since the rebound from the shutdown began in May increased the market perception of a new Fiscal Stimulus package…The unemployment rate fell to a pandemic low of 6.7%, but this was partly due to a drop in the labor force participation rate…The manufacturing sector remained in good shape, but the Institute for Supply Management’s gauge of growth in factory activity posted in November its first month-over-month decline since April. Even the standout housing sector showed signs of cooling, with pending home sales falling in October for the second consecutive month.
• Longer-term Treasury yields defied the mixed economic data and climbed through much of the week, largely fueled by optimism for a fiscal stimulus deal…The increase in longer-term yields led the difference in yields on the 2- and 10-year Treasuries to its widest level since early 2018.
• On the BREXIT front, hopes that the UK and the EU would strike a post-Brexit trade deal by the weekend faded as disagreements persisted on fishing rights, state aid, and other contentious issues. Negotiators will now try to finalize a deal before the EU leaders’ summit next week, according to press reports. On Thursday, French minister for Europe, Clément Beaune, warned in a radio interview that France would veto a deal that did not align with French interests.
• Meanwhile in China, stocks posted their third straight weekly gain, aided by solid economic data… On the economic front, China reported that its official manufacturing PMI rose to 52.1 in November from October’s 51.4, its ninth straight month of staying in expansionary territory and further evidence of a sustained recovery. The private Caixin/Markit manufacturing PMI rose to a stronger-than-expected 54.9 in November from 53.6 the prior month, the seventh straight month of expansion and the highest gauge since 2010, according to the South China Morning Post. The Caixin services PMI rose to 57.8, its strongest reading since June.
Enjoy This Week’s Round-Up;
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