Major indices reached all-time highs to start November. The S&P 500 closed at an all-time high on November 8 for its eighth consecutive positive day. That is the longest streak since 1997. The Dow Jones Industrial Average closed at a record high for the 44th time in 2021 (according to the Wall Street Journal).
Markets continue to rise with strong third-quarter earnings despite the supply chain issues, concerns of rising energy costs, and rising inflation. The strong October U.S. Jobs Report helped with a gain of 531,000 nonfarm payrolls compared to an estimate of 450,000 (see chart below which shows monthly payroll gains/losses since February 2020). October’s gains were a nice surprise after September’s miss. The unemployment rate fell to 4.6%.
Strong demand from U.S. consumers has helped profits, although perhaps assisting with rising costs. Top Federal Reserve officials have indicated the U.S. could raise rates in 2022. Inflation concerns continue as investors debate whether inflation is transitory or here to stay. Fed Chair Jerome Powell indicated he could be open to raising rates due to inflationary concerns. Powell announced the Fed would begin to taper its bond purchases by reducing Treasury purchases by $10 billion and mortgage-backed securities by $5 billion each month. The Fed is currently purchasing a total of $120 billion per month in Treasuries and mortgage-backed securities. Again, the market reacted favorably to the Fed announcement.
Oil rose above $84 per barrel in early November due to high demand, and tight supply, with the U.S. lifting travel restrictions for the vaccinated increasing demand even more. President Biden has asked OPEC to boost output, but they decided to stick to their existing pace. U.S. Energy Secretary Jennifer Granholm indicated that Biden may take measures to address rising energy costs. This could mean the U.S. taps into its strategic reserve due to the supply shortage.
The Labor Department just reported the latest Consumer Price Index numbers for October. The result showed a rise of 6.2% over this time last year. The rise is higher than what most economists had expected and is causing many to question if rising costs are here to stay for some time.
Most of our portfolios at FSA have remained nearly fully invested to their respective equity allocations. This has allowed our strategies to continue to capture the rise in equity markets. We will continue to adjust the overall allocations as market conditions change.
Please consult with your advisor regarding any concerns you may have or any changes to your financial situation.
Aaron Weston, CFP®
Disclosures are available at https://fsainvest.com/disclosures/market-update/.