Market sings familiar tune in November

Mike Loewengart, Vice President of Investment Strategy

E*TRADE Capital Management


This time of year it’s easy to get a song stuck in your head with holiday tunes on an endless loop. “Rudolph the Red-Nosed Reindeer” tops the list for many, but after it’s been rattling around the noggin for a few weeks, no offense to Rudolph, maybe mix in a little “Jingle Bells.”

Sometimes a song on repeat isn’t so bad, though. The market’s pretty much been singing the same tune for a while, and November was no exception. Investors have heard this story before: Equities touched new highs amid strong earnings and optimism about tax reform. On the latter, the House passed its version of a tax bill, which would take the corporate tax rate from 35% to a friendlier 20%, while the Senate put itself on the clock with its version.

Over at the Federal Reserve (the Fed), minutes from its last meeting indicated many participants thought that “another increase in the target range for the federal funds rate was likely to be warranted in the near term.”1 And during his Senate confirmation hearing, Fed chair nominee Jerome Powell, who many pundits view as a continuity candidate, said “conditions are supportive” of another 0.25% move higher in December.2

US equity performances, 12/1/17

Source: FactSet

Domestic equities

Fluctuating performances early gave way to strong gains in the run-up to Turkey day and at month-end. The holiday spirit can be catchy, and it looks like stocks across the capitalization spectrum caught it early. Shoppers too.

The University of Michigan’s Consumer Sentiment Index fell from 100.7 in October to 98.5 in November, but it still matched the index’s second-highest level since 2004. Some market observers took it as a sign that shoppers were ready to open their wallets for the holidays. And shop they did—early reports indicated strong retail sales.3

Consumer staples and consumer discretionary followed suit with big months. Telecom stocks started to hum following news of the Federal Communications Commission’s plan to roll back net neutrality. Financials picked up steam to make for some late November rain, perhaps on comments from Powell, who is said to favor more lighter-touch regulation than Yellen. And while new leadership emerged, tech stocks still came in positive despite a bumpy ride at the end of the month.

S&P 500 sector performances, 12/1/2017

Source: Morningstar

International equities

Economic data and geopolitics, including rising tensions along the Korean Peninsula, highlighted a busy month abroad. Developed markets bested emerging markets, helped by solid gains from Asia, including Hong Kong and Japan. A strong GDP report out of Germany, which suggested its economy is on track for its best annual performance in six years, could be seen as another sign of the strengthening global growth story.

In the UK, uncertainty about domestic politics and several looming European Union deadlines for Prime Minister Theresa May to settle Britain’s Brexit bill may have London’s FTSE 100 Index under pressure.    

Asia led the way in the emerging world with a modest gain. Stocks struggled in Europe, the Middle East, and Africa, though South Africa, which avoided a double downgrade to its local currency debt, had a strong month. 

International equity performances

Source: Morningstar

Fixed income

Accelerating economic growth and tighter monetary policy are not a typical situation for a flattening yield curve, which plots Treasury yields against the length of time they have to reach maturity. And yet, it continued to flatten in November, at one point to its flattest since 2007. Some say that could mean the bond market is in the unconvinced camp when it comes to the US growth story.

Overall, the bond market was slightly weaker, with most segments in a tight range. Long-term Treasuries ended the month in positive territory, outperforming their shorter-term counterparts. Also positive were Treasury inflation-protected securities, perhaps due to the Fed minutes indicating several officials were rethinking whether the low inflation was, in fact, as “transitory” as they originally thought.1

Heavy issuance before year-end, and amid tax reform wrangling, may have dragged down the municipal bond market and contributed to its weak performance. 

2–10 Treasury yield spread

Source: US Department of the Treasury

The bottom line

Improving economic prospects in the US and abroad, as well as thoughts of a meaningful tax reform that could boost corporate profits, have kept markets singing. Don’t count on them carrying that tune forever, though—inevitably, it will change.

But when uncertainty grows louder, either due to fundamentals or simply when the calendar is packed with key events—the last week alone included a slew of economic data, Fed headlines, and tax reform news, to name a few—a diversified portfolio that reflects investors’ investment goals can be one’s guiding melody.

With year-end upon us, it can be tempting for investors to put their headphones on and check out for the holidays. But resisting that urge and making a couple of simple year-end moves may prove beneficial:

  • Review current asset allocation and, if needed, rebalance back to target.
  • Make the most of retirement savings opportunities. If eligible, consider contributing to an individual retirement account outside of an employer-sponsored plan.
  • And lastly, consider tax-loss harvesting in taxable accounts to potentially offset capital gains.

As always, thank you for reading.


Mike Loewengart

Vice President, Investment Strategy

E*TRADE Capital Management, LLC


Additional contributor:

Andrew Cohen, CFA

Director, Investment Strategy

E*TRADE Capital Management, LLC


Mike Loewengart is the Vice President of Investment Strategy for E*TRADE Capital Management, LLC. Mike is responsible for the asset allocation and investment vehicle selections used in E*TRADE’s advisory platforms. Prior to joining E*TRADE in 2007, Mike was the Director of Investment Management for a large multinational asset management company, where he oversaw corporate pension plan assets. Early in his career, Mike was a research analyst focusing on investment manager due diligence for the consulting divisions of several high-profile investment firms. Mike holds series 7, 24, and 66 designations, as well as the Chartered Alternative Investment Analyst (CAIA) and Certified Investment Management Analyst (CIMA) designations. He is a graduate of Middlebury College with a degree in economics.

Andrew Cohen is a Director of Investment Strategy for E*TRADE Capital Management, LLC. Prior to joining E*TRADE, Andrew was the Director of Investments and Operations for a large Registered Investment Advisor, where his responsibilities included investment manager research, asset allocation, and portfolio construction. Previously, he was a Senior Research Analyst and Team Leader for a leading wealth management platform. He is a CFA charterholder and a member of both the New York Society of Security Analysts and CFA Institute. He is a graduate of Virginia Tech with a B.S. in Finance.


1. Minutes of the Federal Open Market Committee October 31–November 1, 2017.

2. Torres, Craigh. “Powell Says Case ‘Coming Together’ for December Rate Hike,” Bloomberg, 28 Nov. 2017.

3. Thomas, Lauren. “Retail stocks climb on the heels of Black Friday,” CNBC, 27 Nov. 2017.