With a notable 8.9% gain at the end of November, the S&P 500 index had its 18th best monthly performance since 1950. Gains in the overall market were eclipsed by technology equities, as the Nasdaq 100 index rose 10.8%, marking its fifth-best monthly performance in ten years. As yields fell, bond markets likewise saw a surge, and metal commodities prospered as the value of the dollar declined.
An increase in investor confidence that the Federal Reserve will decrease interest rates in 2024 in response to declining inflation drove this market rise. As of the end of November, market expectations indicated that the Fed would start reducing interest rates in May 2024 and could do so up to five times by the end of the following year.
In line with market forecasts, the personal consumption expenditure price index, the Fed’s favoured gauge of inflation, decreased from 3.4% in September to an annual 3% rate in October. The likelihood of further rate reductions in the upcoming year was further strengthened by this deceleration in inflation. In November, the financial markets had a notable upsurge, with bonds and stocks rising.
After a sell-off that saw foreign purchasers almost abandon the Treasury markets in the summer and early autumn, U.S. government bonds are expected to have their best month in almost 40 years. At the same time that equity markets are trying to recover their 2023 highs, the VIX index has dropped to its lowest level since before the pandemic. Chair of the Federal Reserve Jerome Powell stressed that it would be “premature” to conclude that the Fed’s measures are sufficiently restrictive, signaling a willingness to make additional policy adjustments if needed.