Into the Home Stretch

The S&P 500 rose for the 6th week in a row.  This is its longest rally since November 2019, as markets waited for this week’s Federal Reserve meeting and inflation reports.

The cash S&P 500 index ended Friday’s session at 4,604, up from last week’s close of 4,594. The week’s best groups included communication services and consumer discretionary, both rising more than +1% each.  Technology, industrials, and health care also notched gains. Energy posted the steepest decline at -3.3%, while materials, consumer staples, real estate, utilities, and financials also closed lower.

Volatility has “collapsed” lower, as our team previously expected, with the spot Vix Index nearing its historically low level of 12-12.5 (ex- 2017).   While in the short term this is beneficial for stocks, it’s not time to get FOMO.  Last week, Fed Chair Jerome Powell said that it would be “premature” to “speculate” when interest-rate cuts may begin as the FOMC is ready to tighten policy further, if needed. The committee has increased interest rates by 525 basis points since March 2022 in a bid to combat inflation, with its last hike coming in July this year.  Investors, please do not get distracted by those on TV quoting Fed Fund Futures as this dataset has not proven predictive of either future interest rate levels or Federal Reserve actions and inactions.

Total nonfarm payrolls rose by 199,000 last month, the Bureau of Labor Statistics reported Friday. The consensus was for a 185,000 gain in a survey compiled by Bloomberg.   As we have for months, the OHFG investment team continues to believe this data set is overstating how good the economy is. Markets are widely expecting the Federal Open Market Committee to hold its benchmark lending rate steady this week.

In communication services, Alphabet (GOOG, GOOGL) rose +2.5%, as it rolled out artificial intelligence model Gemini in some of its products, including its AI chatbot Bard.  In health care, the White House outlined new measures aimed at lowering prescription drug costs and preventing anti-competitive mergers in the industry. For the week, the sector got a boost from a +4.1% rise in AbbVie (ABBV), which agreed to acquire Cerevel Therapeutics (CERE) for $8.7 billion.  In consumer staples, an +11% gain in Walgreens Boots Alliance (WBA) helped counter an -8.1% slump in Brown-Forman (BF.A, BF.B).

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WEEK ENDING 12/8/2023 
(CUMULATIVE TOTAL RETURNS)

WEEK ENDING 12/8/2023 
(CUMULATIVE TOTAL RETURNS) Continued