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Capital Market Recap - November 2018

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SUMMARY

  • U.S. equities rebounded in November, aided by Fed Chairman Powell’s comments that the fed funds rate is just below “neutral” and indicated that the Fed would not engage in an aggressive tightening policy. Real GDP increased at an annual rate of 3.5% in 3Q (second estimate), below the 4.2% rate in 2Q. U.S. manufacturing data improved as new orders grew and demand increased. Greater production demand has led to additional hiring. Though consumer confidence declined slightly, it still remains near historically high levels.
  • International equities remained flat and emerging market equities posted positive returns in November. Manufacturing data in the Eurozone signaled a continued slowdown. The uncertainty of trade wars and tariffs led to the weakest business confidence in nearly six years. In China, manufacturing conditions improved slightly with modestly stronger new orders, inflationary pressures diminished, and consumer confidence remained subdued. Brazil’s factory output expansion and demand growth led to an increase in business confidence.
  • Fixed income investments were slightly positive for the month, except for high yield bonds. The 10-year yield dropped below 3% for the first time since September, as investors moved back to more risky investments. Investors had expected another rate increase in December but are now unsure of the timing of future increases. High yield bonds saw outflows due to fewer expected Fed rate hikes and investors fleeing to less risky investments.

U.S. EQUITIES

  • Broad U.S. stocks were positive (up 2.0%) for the month and saw positive returns on a year-to-date basis (up 4.5%).
  • Size – Small-cap (1.6%) and large-cap (2.0%) stocks both underperformed mid-cap (2.5%) equities during the month. Large-caps stocks continued to lead on a year-to-date basis over small-cap stocks (4.8% vs. 1.0% for small caps).
  •  Style – Value stocks (2.9%) outpaced growth stocks (1.1%) in November but growth stock continued to outperform on a year-to-date basis (7.4% versus 1.3%, respectively).

S&P 500 SECTOR RETURNS FOR NOVEMBER 2018

LOOKING AHEAD

  •  As 2018 comes to a close, it is important to review and consider year-end planning strategies such as charitable gifting, tax-loss harvesting, and contributions to retirement accounts.
  •  We expect the shift to normal levels of volatility to continue in 2019. Stock market declines are a normal part of equity investing and can be viewed as opportunities to rebalance back to target asset allocation weights.
Sources: Morningstar, Inc., Barclays Capital, Russell and MSCI, U.S. Bureau of Labor Statistics, The Conference Board, IHS Markit, The Federal Reserve (central bank of United States), The Bureau of Economic Analysis (U.S. Department of Commerce) & U.S. Department of Treasury

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All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.