The Month of November was a Big Win for the Stock Market… Let’s See if it Continues: Market Commentary from Cabana’s CEO – December 4, 2023 

3 months ago

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The stock market finished off a big month on Thursday having recouped all of the losses seen since the end of July. As stated in our last commentary, this has coincided with falling interest rates and the hope that the economy is cooling (but not too much), and the Federal Reserve’s next move will be to cut rather than raise rates.  

Thursday morning, we got some important and relatively good news in the October inflation, consumer spending and unemployment numbers. This data supports the idea that inflation is continuing to come down toward the 2% year-over-year target and that the job market is loosening up (Source: WSJ). All these factors are related and bad news on jobs and consumer spending turns out to be good news for stock and bond prices. As I see it, this will be the case until the bad news becomes really bad news (a recession), at which time stocks will drop and bonds will act like bonds again and cushion the blow as our Central Bank begins to cut rates. How long this takes to play out is anybody’s guess but the bond market is pricing in a rate cut in the middle of 2024. 

We are seeing some slight rotation out of the “Magnificent Seven” mega cap stocks and into other sectors of the market. These gigantic tech companies now make up 30% of the weighting of the S&P 500 and are the reason for the vast majority of gains seen this year in the market cap weighted indexes that we see every day on TV and read about wherever it is we get our news. I have commented on this many times this year and again will point out that this phenomenon is deceiving. Seven stocks in the S&P 500 have crushed it this year (after being crushed themselves last year) while the other 493 have mostly floundered. In my opinion, market breadth is healthy and market concentration is not. The subtle changes and outperformance by small and mid-cap stocks we have seen over the past week is encouraging and I would like to see it continue into the year’s end.  

We have seen this glimmer of light before during the summer, only to see it fade. If we are at the end of the rate hiking campaign, which seems likely, it would seem we have a better shot of this rally continuing and some much-needed catchup by the rest of the market. 

At Cabana, we are now in our Transitional Bearish (improving) scene and have added equity and duration exposure. 

Key terms: The “Magnificent 7” stocks are the seven largest US-listed companies, which are tech behemoths Apple, Microsoft, Google parent Alphabet, Amazon, Meta Platforms, Nvidia, and Tesla. 


January 17, 2024

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