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11/13/2023 Market Strategy

  • John Stoltzfus
  • November 13, 2023

Who Do You Love?

US investors favored large cap technology stocks last week

Key Takeaways

  • With 92% (458) of the firms in the S&P 500 index having reported third-quarter earnings, results have been generally stronger than expected with earnings growth of 2.8% from a year earlier on revenue gains of 1.6%. Eight of the 11 sectors have registered positive earnings growth with three of those sectors posting double-digit earnings growth.
  • Bond prices took a breather last week as prices sagged. The yield on the 10-year Treasury rose 8 basis points to close at 4.65% on Friday with its yield some 20% higher from where it was at the start of this year.
  • A second consecutive week of gains for the S&P 500 left the benchmark by Friday’s close just 3.9% off from where it stood at its high for this year on July 31.
  • A raft of US economic data including key inflation numbers to be reported this week will help shape the direction stocks take as the week unfolds. 
abstract financials

Stocks moved higher in a rally which continued to favor large cap technology and some cyclical sectors last week as bonds got jostled on concerns about Fed policy, and a 30-year Treasury auction that showed some weakness in demand that ticked Treasury yields higher. The price of oil (West Texas Intermediate) closed lower on Friday at $77.17 some 20% off its high of $93.68 for this year reached on September 27th as apparently plentiful supplies and global economic growth concerns offset earlier OPEC production cuts and currently elevated geopolitical risk in the Middle East.

All in all in our view not so atypical a week for an economy and markets navigating the process of a Fed funds hike cycle that’s in a process since last year that’s brought about what we’ve called “the end of free money” and reintroduced an age old paradigm wherein bond issuers pay for the privilege of borrowing money and bond buyers get something in return for lending their money to a corporation, a municipality, the Federal government or some other entity. Not too shabby if somewhat unsettling when it comes to digesting the higher cost of money across economies around the world that had lived on a “sugar high” of cheap funding of the good, the bad, and the ugly or just about anything that’s floated by finance.

Quotation from Aenean Pretium

With the Fed considered by many to be likely to remain on “pause” or “skip” mode for longer but not likely to cut rates anytime soon we’d expect the markets will remain vulnerable to outbreaks of volatility…

Reality may indeed bite but sometimes it’s better than the delusion that cheap money can create across an economic landscape and asset classes.

A powerful rally that has followed a three-month market correction in stocks that took the S&P 500 from a peak level for the year of 4588.96 on July 31 to a fourth-quarter low of 4117.37 on October 31st has seen the venerable benchmark regain much of the ground it had lost from peak to trough in the mid-summer to late-fall drawdown. As of last Friday the S&P 500 stood at 4415.24 just 3.9% shy of the level it had closed at on the last day of July.

Where to from here?

In the week ahead there’s enough economic data scheduled for release across gauges of inflation, unemployment, retail sales, manufacturing and housing to provide clues that will likely influence stock and bond market direction.

With the S&P 500 earnings season fast drawing to a close the few companies that are left to report will have some influence on the day to day action in stocks as some of the biggest names in retail report results. Guidance from managements will likely carry the most weight this week as market participants look ahead to the holiday shopping season as well as to fourth quarter earnings season which won’t get underway until after New Year’s.

With the Fed considered by many to be likely to remain on “pause” or “skip” mode for longer but not likely to cut rates anytime soon we’d expect the markets will remain vulnerable to outbreaks of volatility on any catalyst than could justify “selling without FOMO” by bears, skeptics and nervous investors.

That said, we remain positive on equities. In our view stocks have a good chance to move higher if not always in a straight line from here as the Federal Reserve continues to hone in on its inflation target rate while likely remaining sensitive to the effects of its mandates for economic stability and full employment on the US economy as it has been in our view for much of this rate hike cycle.

Diversification, right sized expectations and patience remain optimal disciplines in our view at this time for intermediate- and longer-term investors. Seeking “babies that get thrown out with the bathwater” in market downdrafts remains our preferred choice of action rather than blindly “buying the dips”. In our view a focus on quality remains an important consideration always but especially in markets navigating a course toward the next new normal.

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John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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