What a difference a month makes.
After a weak October, stocks rallied in November, driven primarily by moderating crude oil prices, tame inflation, strong new home sales, surprisingly robust third-quarter GDP growth, and better-than-expected consumer confidence. The data fuelled optimism that the national economy may have overcome this summer’s devastating Gulf Coast hurricanes.
November witnessed both the S&P 500 and NASDAQ indices reaching 4-1/2-year highs. The Dow rose to its highest level since March 2005. For the month, the average domestic stock mutual fund gained 4.15%, while the S&P 500 climbed 3.52%, and NASDAQ advanced 5.31%.
U.S. equity funds rose across the board in November, with growth-oriented portfolios outperforming value offerings. Small-cap growth funds delivered the best performance for the month, rising 5.24% on average. Year-to-date, mid-cap growth funds have risen 8.61%, which put them at the top of the list. All fund style categories are in positive territory, both for the month and year-to-date periods.
From the start of the year through the end of November, the average stock fund has gained 6.25%. Over that period, the S&P 500 rose 4.61%, the NASDAQ climbed 2.64%, and the Dow is essentially flat, up only 0.21%.
Standard & Poor’s Global Investment Policy Committee (IPC) cited the positive economic environment in discussing the November rally. “Inflation fears appear to have receded,” IPC said in a statement. “Benign core CPI data, coupled with indications in the November FOMC minutes that an end to Fed tightening is approaching, have bolstered investor confidence in future growth prospects.”
November began with the Federal Reserve hiking its target rate by 25 basis points, as was expected, to 4.00%. Moreover, minutes from the Fed’s latest policy meeting during the month seemed to indicate that the central bank may soon cease tightening.