U.S. equities had quite a month in November. By the 30th, both the Dow and S&P 500 had hit new all-time highs, with the Dow rising above 24,000 for the first time ever. The S&P 500 also marked its longest run of monthly gains in a decade.
Throughout the month, we received a variety of economic updates that helped support this performance. As October’s data came in, many reports indicated that the economy is growing. For example, the housing market showed strength, as existing home sales beat expectations. The latest reading of new home sales also came in far above the anticipated results. The numbers were higher than they’ve been since 2007.
In addition, consumers spent more in October—while their incomes rose, too. This growth should be positive news for the economy. Consumer spending comprises about 70% of U.S. economic activity. So, higher spending can mean stronger economic growth.
In fact, the latest reading of Gross Domestic Product, or GDP, revealed that the economy is already picking up speed. During the 3rd quarter, GDP grew by 3.3%—the fastest pace in 3 years.
Experts believe economic growth may slow slightly in the 4th quarter. But they still think GDP readings could be at 3%. How much consumers spend during the holiday shopping season will largely impact the last quarter’s growth. With low unemployment and increasing incomes, we could experience higher spending.
Looking back on November, consumer behavior and new economic data are not the only topics that moved markets. One critical detail is tax reform.
The House and Senate each released their own long-awaited bills, and the market has reacted to key differences between the two. In particular, the Senate’s proposal to delay corporate tax cuts until 2019 contributed to a stock selloff earlier in the month. Then, by November 30, the markets hit record highs as Senator John McCain’s support of the bill seemed to increase its likelihood of passing.
As of now, no one can say if the Senate and House will be able to come together to create a compromise tax bill they can each pass before year’s end. Expectations for tax reform have pushed stock prices up in the U.S. But, uncertainty over whether the promised changes will actually happen is affecting both market performance and consumer sentiment.
As the tax debate continues, December should provide a lot of new information for the markets to digest. Also, many analysts expect the Federal Reserve to raise interest rates this month. This would be the 3rd interest rate increase in 2017.
We will continue to monitor these and many other economic details in December. And we always welcome your questions about anything covered this article or anything else you may have on your mind.
That wraps up our educational economic update for this month.
Disclosure: While we believe the information in this report is reliable, we cannot guarantee its accuracy. Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining markets. The indices mentioned are unmanaged and cannot be invested into directly. Past performance does not guarantee future results.