2023-12-04 00:23:08
S&P 500 Index ends smoothly in November; analysts are optimistic about the stock market outlook at the end of the year
2023-12-04 08:23:08
Beneath the surge in U.S. stocks in November, there’s an eerie calm that suggests more gains may be in store for stock market investors at least until the end of the year.
Zhitong Finance APP learned that although the market momentum has weakened after experiencing the second best November since 1980, the average daily volatility of the S&P 500 index last week was only 0.3%, the smoothest week in half a year. . The CBOE Volatility Index (VIX) fell to its lowest level this year on Friday, while stocks rallied after Federal Reserve Chairman Jerome Powell gave his clearest signal yet that officials are done raising interest rates.
Frank Cappelleri, founder of CappThesis LLC, said: “The market can digest overbought conditions by falling or over time, and so far, the S&P has slowly digested big gains over time. The first half of November was so strong The subsequent slowdown should be viewed as constructive.”
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For bullish investors, this price action suggests that risk appetite is not creating the kind of frenzy that typically precedes a plunge. It also reflects how reluctant investors are to cash out when the overall stock market benchmark is about 4% away from record highs.
Last week, the S&P 500 rose 0.8%, its smallest gain in five consecutive weeks of gains. What happened? In short, after a series of big trading days in the first half of November, the market entered a period of relative calm, with the index not showing a 1% move for 11 days in a row, the calmest end of the month since July period.
If history is any guide, December is unlikely to bring a massive sell-off. September was the S&P 500’s third-best month since 1950, with an average gain of 1.4%, according to data compiled by the Stock Trader’s Almanac.
Fund managers’ tendency to buy high-performing stocks toward the end of the year to boost fund performance helps drive this seasonality. Typically, stocks also perform strongly during the last five trading days of December and the start of the new year.
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However, there are still many risks in the current market. First, the market expects the economy to achieve a soft landing, but there is no guarantee that growth will remain resilient after all the Fed’s tightening policies take effect. One ominous sign was that the U.S. factory activity index contracted for the 13th consecutive month in November.
Additionally, another concern is that most of this year’s gains have been driven by a small portion of the market. According to data compiled by Societe Generale, this is the narrowest driving force in a market that has risen by more than 15% in history. A popular momentum indicator is also sending warning signs: The benchmark’s 14-day relative strength index jumped from depressed conditions to overbought levels in less than a month.
That’s partly why Frank Value Fund manager Brian Frank is cautious about the market’s rise.
He said: “U.S. stocks have gone from severely oversold to severely overbought in such a short period of time. Therefore, a strong move in November may usurp some of the historically strong performance in December.” In response, Frank is buying stocks with dividends. Stocks of well-known small and mid-cap companies.
Business executives buy
However, bullish investors got reassuring signs from corporate executives, who bought more shares of companies in November, pushing the ratio of buyers to sellers to six, according to data compiled by the Washington Service. highest level since last month.
At the same time, the options market is also releasing a sense of confidence. The VIX futures curve, which is often used as a guide for speculative positioning in the coming months, shows a lack of demand for downside protection. Across a range of maturities, the curve is lower than in early November.
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While there may be little suspense surrounding the Fed’s December 13 interest rate decision, with the Fed widely expected to keep interest rates steady, there is still potential turmoil from the economic forecasts released that day and Powell’s press conference. On Friday, while the Fed chairman downplayed bets on a rate cut in mid-2024, bond traders doubled down on the idea that the central bank will ease policy next year.
Dennis Debscher, founder and chief market strategist at 22V Research, said: “The dovish shift mitigates some short-term market and longer-term recession tail risks. A more dovish Fed is unlikely to resist the recent easing of financial conditions. This should have Good for the riskier parts of the market.”
Warning from the financial community: The content, data and tools in this article do not constitute any investment advice and are for reference only and do not have any guiding role. The stock market is risky, so be cautious when investing!
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