Stocks woke up from its tryptophan-induced Thanksgiving nap and pushed to new highs. The S&P 500 gained another 2.5% and most major market indexes notched another all-time high during November.
We’re still waiting on Congress to get a tax bill on the President’s desk before the end of the year. Optimism that this could actually happen has put investors in the holiday spirit and, as a result, the markets might have already “baked” tax reform into the cake. If there’s no deal, we could see a market drop for a Christmas present this year.
Bonds were a mixed bag this past month as interest rates crept up ever so slightly. U.S. government bonds rose while corporate bond prices dipped slightly.
Outside the states, we still have the odd negative interest rates in Germany, France, and Japan, and it doesn’t look like they will be raising rates anytime soon. This gives us a little wiggle room when it comes to raising our rates, which is nice.
Speaking of interest rates, the Fed is expected to raise rates again after they meet in December. This is expected and shouldn’t affect the markets much.
For those who weren’t around in the late 70’s/early 80’s and think rates are getting high, here’s a nice 55 year chart of the interest rate of the US Treasury 10 year note to put it into perspective: http://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart.
On the savings side, rates are starting to creep up with a little more speed but they’re certainly in no hurry.
Currently, the average money market/savings account is paying 0.73%.
The 1 year CD interest rate is now averaging 1.64% (up from 1.51% last month) and the 5 year CD rate is at 2.17%(up from 2.14% last month).
The good news is that mortgage rates continue to stay extremely low, with the 30 year refi rate at 4.04%. Depending on the loan terms, if you have a current mortgage with a loan rate over 5%, you should at least check out refinancing it.
Oil prices rose about 5.7% in November, continuing its upward trend since bottoming in June. Price per barrell now sits at $57.30.
Hurricane season is now officially over. That means a colder than expected winter is the most likely factor that will cause a price increase between now and Spring 2018.
Nationally, gasoline prices are averaging about $2.49 per gallon. FYI, a year ago, we were paying $2.16. San Antonio, TX has the cheapest gas in the country at $2.14.
Check out the prices at the pump in your area: Gas Buddy.
Outlook
Events on the horizon that could move the markets in November:
- Russian Investigation: It’s hard to keep up with this one. There are so many moving pieces and distractions. This could make for a pretty good movie one day. Still, odds are slim that Mueller will indict President Trump, but it does appear that more of his aides and appointees will be in his crosshairs shortly. Any market pullback from this should be short lived (less than 6 months) and will provide a buying opportunity for long term investors.
- Escalating Tensions with North Korea: The stock market doesn’t believe anything will come of this, as evidenced by its muted reaction when Kim launched another rocket a few days ago. However, if Kim keeps pushing Trump’s buttons, this could escalate quickly. Hoping it stays just a war of words.
- Global Economy Strongest in Years: A big plus the stock market carries into 2018 is simply that the global economy appears to be stronger than it
has been in years. According to OECD (the Organization of Economic Cooperation and Development), on a year-over-year basis,
GDP in the OECD area grew a healthy 2.4%. Additionally, OECD reports that all of the world’s 45 largest economies grew in the quarter. Good stuff.
Joe Baker, CFP
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
