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Navigating the Markets

I hope everyone's had a great weekend. It's time to dig into what's going on in the world around us, from the economy to the markets in this week's Navigating the Markets!

The Big Picture

We got ISM Manufacturing PMI data on Friday. It was a bit of a mixed bag, with mostly softer data.

Source: ISM
  • New orders continue to decline, albeit at a slower pace

  • Employment deterioration accelerated as more jobs in the industry were lost last month (we saw similar in jobless claims yesterday)

  • Prices were about flat month-over-month, nearly ceasing their recent decline

Source: ISM

  • Backlogs accelerated their deterioration, showing further evidence of the manufacturing industry slowing both now and likely in the future

Core CPI continues to fall, now at the lowest level in two years. The Fed's tightening is working to slow inflation, but there is still more work to do here.

Source: Edward Jones

Initial jobless claims rose marginally, but remain rather subdued. I won't be particularly concerned about the labor market until we see jobless claims in excess of 300K and JOLTS job openings fall to a point where there are less than one job opening for each unemployed person seeking work.

Source: Edward Jones

2024 is a huge election year, with more of the global population with legislative and presidential elections than any other time in the last 220 years (and quite possibly ever).

Markets and Mayhem

Last month was the 7th best month for stock market performance since 1992, living up to the hype of November seasonality. We had an abundance of flows that helped to support a strong market, including share buybacks, inflows from investors and institutions, such as pensions and retirements, as well as powerful CTA buying, and a fair amount of supportive developments, such as lower inflation readings, falling rates, and the presumption that the Fed's hiking cycle is now over and cuts are coming as soon as the first half of next year.

Source: Edward Jones

Seen below is the peak in rates and the bottom in stocks. Rates, and other key correlations, still do play an important role in price discovery within a variety of asset classes. While those have shown some divergences, it's important to consider that inflection points often remain at similar junctures in time within both stocks and rates. Especially over the last two years.

Source: Edward Jones

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