Market Commentary

Monthly Financial Markets Commentary — December 1, 2023

Stocks and bonds rocketed upward in the month of November, erasing losses in the prior three months. Interest rates dropped precipitously as investors focused on declining inflation and moderating growth in the economy. There is a very close [and inverse] correlation between the 10-Year Treasury Rate and the markets, particularly the S&P 500 and the Nasdaq. By and large, investors believe that the Fed will be dropping rates soon, that there will be no recession, and that the economy will do just fine - i.e., the proverbial "soft landing".

Breadth in the market remains very narrow, as seven stocks account for the bulk of the year-to-date gains in the S&P 500 Index, those being Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta (the so-called "Magnificent Seven"). By most traditiional measure these stocks are overvalued but investors view them as "safe", since they have risen the most and not endured significant losses in downturns. Narrow breadth is normally a harbinger of market turbulance, as investors have piled into the same stocks and driven them to high historical multiples of earnings. The equal-weighted S&P 500 Index has returned far less than the cap-weighted S&P 500 Index, demonstrating the disproportionate effect the seven stocks have had on the market.

For 2023 the S&P 500 Index, the capitalization-weighted broadest measure of U.S. stock market performance, has returned 20.47%. The Nasdaq Composite Index, another capitalization-weighted index, but more reflective of growth stocks, has returned 37.37%. Finally, the Dow Jones Industrial Average, a price-weighted index, has returned 10.29%. All returns are on a total return basis in that they include dividends.

The Morningstar U.S. Aggregate Bond Index, a broad measure of the U.S. bond market, has returned 1.59% for the year, as interest rates have fallen dramatically in the last few months. Investors believe that Fed Chairman Powell will blink and cut rates soon, that inflation has been conquered and the economy and corporate profits will rise from here. The economy will apparently transition from roaring inflation and 15 years of surpressed interest rates with nary a hiccup. However, there are several trends that do not auger well for interest rates in the coming year. First, the Fed is well into its program of "quantitative tightening", which drives up interest rates through an increase in the supply of government bonds. Second, the government is running gargantuan deficits and it is unclear exactly who the buyers of all this newly issued debt will be (probably not China or Japan, the traditional buyers of U.S. government debt).

The sectors in the equity market that have performed the best in 2023 are Consumer Discretionary, Industrials and Information Technology at 30.5%, 10.3% and 49.2%, respectively. Consumer Staples, Healthcare and Utilities have fared the worst at -3.9%, -4.1% and -12.4%, respectively.

The comparison of current price/earnings ratios and dividend yields as of December 1, 2023 to those of the prior year is as follows.



Prior Year*

S&P 500




Dividend Yield (%)



Dow Jones Industrial Average




Dividend Yield (%)



* based on 12-month trailing data

Current national average CD deposit yields for one-year, two-year and three-year instruments are 5.35%, 4.45% and 4.05%, respectively. This class of investments now offers very competitive yields.

Gold and crude oil most recently traded at $2.075.20 and $77.50, respectively, compared to $1,825.15 and $81.75 one year earlier. Gold has risen in reaction to global political instability and falling interest rates; crude oil has fallen in line with softening global demand.