Chart Attack!

November 5, 2023

Stocks shot higher in the opening days of November after October's Halloween tricks! Has a Santa Claus rally finally begun or are there some tricks still left in that stale bag of Halloween candy?

I'll try to help you understand what's happening with some charts I've collected this week. There are also some important and timely personal finance tips at the end of this email. Be sure to click on the links provided! Want more? Visit our community website!

As October drew to a close, I was becoming concerned the stock market was slipping into something worse than a correction. The S&P 500 was trading below its 10-month moving average and was perilously close to falling below the 20-month moving average, a momentum shift typical of the start of a bear market.

In fact, on an equal-weighted basis (RSP), the moving averages were indicating bear market potential.

Then this happened last week.

The 5%+ surge in stock prices in the first few days of November has at least temporarily eased my concerns. The S&P 500 is now trading above both moving averages. Unfortunately, RSP, despite its strong rally, is still below its moving averages, suggesting some caution is still warranted.

The weekly moving averages also paint a more upbeat picture for the S&P 500.

Although RSP is still somewhat iffy.

Here are the performance tables for the end of October:

Performance (as of 10/31/23) | Under A Buttonwood Tree

First, let’s look at some October results. They were not pretty! As a result, year-to-date performance through 10/31 looked like this: Large-cap growth and quality have been the place to be so far this year:

Under A Buttonwood Tree

And here is the performance for last week. REITs soared!

A more detailed review can be downloaded here:

Last week's market rebound was driven by investor optimism that interest rates may have peaked.

Long Rates Moving Lower | Under A Buttonwood Tree

The midweek release of the Treasury’s Quarterly Refunding Statement coupled with some weaker-than-expected economic data has pushed long rates down a quarter point or more. Stocks have responded positively (to say the least!). (Source: MarketDesk)

Under A Buttonwood Tree

At their November meeting, the Fed left the Fed funds rate target alone.

Plateau | Under A Buttonwood Tree

As expected, the Fed left the Fed Funds rate alone at their November 1 meeting and investors are betting the rate will remain unchanged through at least year-end.

Under A Buttonwood Tree

The employment picture softened as payrolls were weaker than expected and the unemployment rate was higher, easing pressure on the Fed to raise rates again.

Jobs Come Crashing Down: October Payrolls Miss Estimates, Rise Only 150K As Employed Workers Plummet By 348K

The Bidenomics fake data miracle is over.

ZeroHedgeTyler Durden

Of concern, however, is what rising unemployment means for stocks. At least since the start of the 21st century, it has signaled the start of a bear market. It's something to keep an eye on.

Unemployment Rate Rises - Now 3.9% | Under A Buttonwood Tree

And stocks generally don’t respond well… (Source: MarketDesk)

Under A Buttonwood Tree

There was some good news on the productivity front. The report was much better than expected. This is good news for the economy in general and inflation in particular (not to mention corporate profits).

Productivity Jumps | Under A Buttonwood Tree

U.S. productivity rose 4.7% (annualized) in the third quarter confounding economists who had predicted a 4.3% decrease. It was the fastest gain in three years. As a result, unit labor costs fell 0.8% versus an expected increase of 0.7%. This sounds lik…

Under A Buttonwood Tree

Even so, you should expect the economy to slow significantly in the fourth quarter.

The Party’s Over: Atlanta Fed Slashes Q4 GDP Estimate From 2.3% To 1.2%

Next stop: recession, rate cuts, more stimmies, and so on.

ZeroHedgeTyler Durden

Analysts continue to lower their estimates after a flood of earnings reports.

Analysts Continue to Lower Estimates | Under A Buttonwood Tree

For seven weeks now, analysts have lowered more estimates than they have raised… (Source: The Daily Shot)

Under A Buttonwood Tree

Here are some of the reporting companies this week. Maybe they can change the downward trend.

I came across this interesting compilation of Time Magazine's 200 best inventions of 2023. It's fun to review and just maybe you'll find a gift idea - Christmas is just around the corner...

200 Best Inventions of 2023

Groundbreaking innovations that are making the world better, smarter, and a little more fun

Time

Do you participate in your employer's 401K plan? You should and to the maximum extent possible! The IRS has just raised the amounts you can contribute in 2024.

IRS Lifts Contribution Limits for 401(k), IRA Retirement Plans

The IRS said the contribution limit for 401(k) and related plans will increase to $23,000 for 2024, from $22,500 this year, a welcome increase for retirement savers.

BarronsElizabeth O’Brien

For those of you who own mutual funds in your taxable accounts, be aware, this is the season for capital gains dividends. Always use caution when buying mutual funds toward year-end. You don't want to be hit with a big capital gain tax bill! Should you already own a mutual fund with an expected capital gains distribution, check with your tax or financial advisor for strategies to minimize the tax hit. (This problem is almost non-existent if you stick with ETFs.)

Ouch. Some Fund Investors Will Face a Big Tax Bill.

Investors in some popular mutual funds are in for a big surprise with taxable distributions in excess of 10% and 20%.

BarronsLauren Foster

Thank you for reading! Feel free to forward this email to a friend or colleague.

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