Fun Facts about November
- Birthstone: Topaz and citrine
- Flower: Chrysanthemum
- Zodiac signs: Scorpio and Sagittarius
- In the original Roman calendar, November was the ninth month of the year. It got its name from the Latin word “novem” which means nine. However, it became the eleventh month when the Romans added in January and February to the start of the year.
- November’s equivalent in the Southern Hemisphere is May.
- November 1 is All Saints’ Day.
- November 2 is Election Day (U.S.).
- November 7 at 2 A.M. is the end of Daylight Saving Time. Set your clocks back one hour on Saturday night at bedtime!
- November 10 is United States Marine Corps birthday.
- November 11 is Veterans Day.
- November 25 is Thanksgiving Day.
Stocks bounced back from a rough September and resumed their upward trajectory in October. The S&P 500 gained 6.8% for the month and the index is now up 22.8% for the year. That is very impressive, considering the negative backdrop caused by the pandemic, rising consumer prices, and supply chain snafus.
We are in the midst of Q3 earnings season and most companies are reporting earnings that are beating analysts’ expectations, another catalyst for rising stock prices. As far as future revenue and profit outlooks go, most companies see the current supply chain issues resolving themselves by spring of 2022. Still, for the holiday shopping season, there are going to be a lot of empty shelves this year as literally tons of goods sit off our coasts.
Covid is off the front-page news but continues to impede the economic recovery, more with vaccine mandates and the stiff resistance to comply. Still, even as we have reached 5 million deaths worldwide due to Covid, we are seeing a steady drop in hospitalizations and deaths here in the states.
Seasonally, we are entering that time of year where stocks have consistently performed well. The November through April timeframe has historically been the best time of the year to be invested in the stock market. We will see if that holds true as the market gets pushed and pulled towards the end of the year.
Take a look at the Outlook section below to see what events could move the markets over the short term.
Bond prices of nearly all flavors fell again in October as inflation continued to pop up across most industries. Still, the Fed doesn’t look like it’s going to raise rates any time soon. They will stop buying government bonds and other securities, in other words, start tapering, to tighten up the money supply, which should cause rates to rise. I think the plan is to taper purchases through the middle of 2022 and then start raising rates, if needed. This action by the Fed will cause bond prices to drop and their yields to rise. So, please be cognizant of this when buying bonds with a maturity date greater than 1-2 years. In this type of interest rate environment, you can expect to lose principal unless you hold the bonds to maturity.
The 10-year US Treasury note is now yielding about 1.6% and the 30-year bond is almost at 2%, both about the same from last month. The path of least resistance for these rates is up, so expect these yields to rise and their respective bond prices to drop as the fed pumps the brakes on buying so many of these bonds every month.
Interest rates were flat in October. CD, money market, and savings account rates are still incredibly low. These rates should move higher over the rest of the year, but the savings rates will most likely still be too low to keep up with inflation. They certainly won’t rise as much as debt service rates, such as credit card interest rates.
Currently, the average savings account is paying 0.28%, just a smidge lower than last month’s 0.29% average. Although safe from market fluctuations, putting all your eggs in a savings account is not the best bet, especially if you need to grow your account value. Plus, you have to pay taxes on that interest. I do expect these rates to start inching up over the next year.
The 1-year CD interest rate is now averaging 0.46%, the same as last month. The 5-year CD rate remained flat as well, at 0.73%. You’re certainly not getting rich owning these. Hopefully, these rates will continue to head higher over the next few months.
Mortgage rates saw a nice little bump up as everyone prepares for the Federal Reserve to act on taming inflation. Currently, the 30-year rate sits at 3.14%, up from 3.03% one month ago. This rise in rates was certainly expected and more increases should be on the horizon. Still, historically speaking, mortgage rates are still near all-time lows, which will continue to help the housing industry, which is having an amazing year.
Oil prices accelerated their move higher in October as demand picked up due to the pandemic recovery. The price for a barrel of oil went up by over 11% to settle at $83.57 at the end of the month. Prices for the year are up over 73%. It’s hard to believe that oil was selling for negative $40 (that’s right, -$40) a barrel back in April 2020!
OPEC is not in any hurry to increase oil production and who can blame them. I’m sure they want to maximize their profit while they can. But this will only accelerate the inevitable acceptance of electric vehicles and clean energy fuels to replace fossil fuels as the standard energy source for so many industries. Of course, this transition won’t happen overnight, but the writing is certainly on the wall for fossil fuel producing countries and companies.
As expected, gasoline prices moved up in unison with oil prices this past month. Prices at the pump are averaging about $3.40 per gallon, about 21 cents higher than a month ago. Oklahoma has the cheapest gas right now, at $3.01. California has the most expensive at $4.61 per gallon. FYI, a year ago, we were paying $2.13.
Fuel prices are high but, as the saying goes, the best cure for high fuel prices is high fuel prices.
Check out the prices at the pump in your area: Gas Buddy.
Outlook
Events on the horizon that could move the markets in the near term:
- Infrastructure Bill: Finally, it looks like The House of Representatives will vote on this bill some time this week. Sectors that could benefit from this bill passing are clean energy, building materials, and electric vehicle stocks. Although these sectors have been performing well already in anticipation of this legislature getting approved, we still should see a nice bump in stock prices in these industries.
- Coronavirus: The pandemic has left the front-page news cycle once again as both cases and deaths have continued to drop across the country over the past month. Sadly, we are still averaging about 1,400 deaths per day, upping our death total to near 750,000. Only 1% of these deaths occurred in people who were fully vaccinated, according to the CDC. This amazing stat should convince anyone who is skeptical of the vaccine to get the shot. The vaccination rate slowed down yet again in October, which now shows that only about 67% of the U.S. population has received at least one dose, up from 65% last month. New vaccine mandates around the country are being met with stiff resistance so these numbers may not improve any time soon. If this is the case, people who were vaccinated and/or infected early in 2021 will lose their immunity and will be vulnerable again, creating a vicious cycle. Eventually, we will break the cycle, either by convincing more people to get vaccinated or by more people getting infected, or most likely, both.
- Fed & Inflation: Fuel and material prices continue to rise, albeit at a slower pace than in the past few months. These price increases are being fueled by both a huge supply/demand imbalance (heavy on the demand) and major disruptions to the global supply chains. With this backdrop, the Fed might act quicker than expected, raising short term rates to curb inflation. They aren’t expected to mess with rates until mid-2022, but things could change without notice, especially as the economy continues to expand from the pandemic’s grip. This is something that investors should monitor closely, in my opinion, since the current low-interest rate environment has been providing a solid floor for stock prices over the last several years.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
