November 2023 Monthly Review

A Look Back

The title above, "I’m Lovin’ It," is the long-running jingle-slogan for the fast food chain, McDonald’s. It was created in 2003, and McDonald’s paid Justin Timberlake $6 million to sing the jingle. At two decades, it is by far the longest running brand slogan for the company, as the “ba da ba pa pa” notes end seemingly every ad. The twin arches paid Justin Timberlake a reported $6 million to sing the jingle, as it has stood the test of time these past 20 years. The catchy slogan can also describe how most investors are feeling after a blowout positive return month in November. Thanksgiving indeed! To put it in perspective, the S&P 500 return of 9.13% in the month, represented the seventh best monthly number in the last 30 years. Further, and perhaps more directly related than many realize, Core Bonds, as represented by the Bloomberg Aggregate were up over 4.5% in the month. That marks the best monthly return for that standard index in the last 30 years. The relationship comes from the idea that much of the stock rally can be attributed to the belief that interest rates have peaked, and in fact, as yields came in, prices on Core Bonds soared…leading to positive results in both asset classes. So, when you put those two main portfolio components together, it made for one of the best overall monthly investor returns since the Covid rebound in 2020. We have been talking about the potential for outsized bond returns over the last several months, and we realized nearly a year’s worth of returns in one month! Perhaps most importantly, it reinforces our main mantra that a suitably diversified investment portfolio that is actively managed to take advantage of market movements…either way…is the most effective way to build wealth over time. My dad used to say, “if you only plant corn in April, you’re just shucking stalks in September.” The rest of the asset classes performed well in November as well, with Commodities being the only real clunker.

A Look Ahead

The last month of every year is usually an interesting one. It’s typically a time to evaluate what has happened the prior eleven months and take a bigger picture view of how markets and our investment portfolios are structured and performing. It is also a time that we look forward to the new year and what that may bring. For a variety of reasons, the turning of the calendar plays more of a role than just the passing of another month. We look at potential tax consequences in the current and coming year. It is a chance to start fresh. The rally discussed above was supported by favorable economic news: inflation continued to trend lower, there was a perception that the Fed may not have to continue its tightening policy, corporate earnings came in better than expected and the consumer continued to defy the gravity of high interest rates. There seemed to be some substance behind the rally. We will continue to be grateful, but aware as we navigate forward. There are still some major geopolitical situations around the globe that have the potential to zig on a course that may provide some angst, and we remain concerned about the overall breadth of the rally. Most of the overall returns in large-cap domestic stocks in 2023 can be attributed to the “magnificent seven” stocks (Meta, Nvidia, Apple, Alphabet, Microsoft, Tesla). Those seven Tech names are responsible for around 80% of the overall YTD return. A more widespread support would be healthier. For now, we take a more neutral stance in our asset allocation entering 2024. Finally, we end with a heartfelt wish for the very best holiday season for all that we touch. It has been truly humbling to be a small part of the success of so many families and businesses!