Key Points:
- Stocks had another solid month with the Dow and S&P500 hitting record highs
- The strong returns in the U.S. stock market were felt across all market caps and styles
- Tax reform seems to be working its way through the system, creating risk on/risk off behavior in stocks and bonds
Stocks enjoyed a strong showing in November, as the major indices once again hit all-time highs. The S&P500 posted a 3.07% gain for the month, bringing its year to date return to 20.49%. November was unique in that we saw broad based gains, with strong returns in value (+3.06% Russell 1000 Value), growth (Russell 1000 Growth +3.04%), mid (Russell Mid Cap +3.36%) and small (Russell 2000 +2.88%). All 11 sectors of the market had a positive return with telecom (+6.03%), consumer staples (+5.67%) and consumer discretionary (+5.06%) leading the way. Laggards for the month were materials (+0.99%), technology (+1.15%) and energy (+1.76%). As details of corporate tax reform get disseminated, investors have favored those industries with the largest tax burdens.
International stocks lagged the U.S. but still had a positive return. Developed markets were up 1.05% while emerging markets were flat (+0.20%). International stocks continue to outperform for the year with developed markets up 23.49% while emerging markets have gained 32.53%. Global trade negotiations, Brexit talks, and US tax reform seem to have slowed international investment a bit.
While stocks seemed to trend higher on days where tax reform was progressing, the opposite effect was occurring in bonds. Rates climbed on ‘tax reform on’ days and seemed to fall or remain stagnant on ‘tax reform off’ headline days. Overall the US bond market lost 0.13%, with intermediate corporate bonds selling off. High yield bonds (-0.25%) and municipals (-0.54) were the worst performers. Overall, the Barclays US Aggregate Bond Index is up 3.07% for the year. Global bonds were the best performer for the month, with the Barclays Global Treasury ex US index up 2.2% in November.
Source: Morningstar