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Equity prices remained volatile and mostly negative throughout November, continuing the October correction, but rebounded to finish slightly positive for the month. International stocks also rose slightly, but continue to lag domestic markets for the year. Bond prices were little changed, though higher yielding bonds were slightly negative for the month, and remain roughly neutral year‐to‐date.

Fed Chairman Powell comforted the markets with his speech on November 28 regarding his stance on future interest rate hikes. He maintained that the U.S. economy is doing very well, but importantly inserted that interest rates remain “just below” the broad range of estimates of neutral. In previous remarks, he had stated that policy was “not close” to neutral, suggesting a series of further interest rate hikes. His latest assessment indicates that the Fed is nearing the end of their rate hiking cycle, which would be a strong positive for the markets.

Another positive development came this past weekend as President Trump and President Xi agreed to delay the next round of tariffs in the U.S./China trade dispute. China has pledged to ramp up its imports from the U.S., with a focus on agriculture, energy, and industrial goods. The two countries will immediately start to negotiate “structural changes” to intellectual property protection, non‐tariff barriers and services trade. This could be a positive in many ways, and the U.S. has now de‐escalated tensions on all fronts of the trade war.

Tis the season for consumers to spend. Cyber Monday sales topped $7.9 billion (up 19.7% from last year), according to Adobe Analytics, making it the single largest shopping day in U.S. history. Thanksgiving Day brought in $3.7B and Black Friday had sales of $6.2B, up 28% and 23.6% respectively.

Even as the markets face heightened volatility, fundamentals for U.S. companies remain solid. Unlike strong gains last year, market returns have not kept up with earnings growth, leaving stocks at more attractive valuations. The S&P 500 now trades around 16x forward earnings. Balance sheets are strong, dividends are increasing, and earnings growth is at an all‐time high. As long as these fundamentals remain in place, pullbacks should be short‐lived and equities should resume moving higher.

Best Regards,
Clay

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