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November 20, 2023

“We must find the time to stop and thank the people who make a difference in our lives.”

John F. Kennedy


As we start Thanksgiving week, I thought it would be appropriate to remind all of the many blessings God Almighty has given all of us, we are most appreciative of the faith and confidence you have give all of us over the years at Hinsdale Associates, so we would like to offer our profound thanks and gratitude to all.

Speaking of gratitude, last week offered much to be thankful for; here are the numbers. The big three indexes locked in their third-straight week of gains. The S&P 500 rose 0.1% on the day and 2.2% on the week. Its three-week gain of 9.6% is its best such stretch since June 5, 2020. The Dow Jones Industrial Average rose just 1.81 points but gained 1.9% on the week. The Dow is up 7.8% over the past three weeks. It’s largest three-week gain since Nov. 11, 2022. The Nasdaq Composite rose 0.1% on the day and 2.4% on the week. It marked its best three-week percentage gain since April 24, 2020. Joining the party, the FTSE 100 was up 1.95% and the MCSI-EAFE rose 1.35%. On Friday the 2-year treasury Yield fell to 4.88% and the 10-year closed at 4.441%.

The recent move down in interest rates in the Treasury market has been supporting equities. Treasury debt yields have fallen as many investors anticipate that the Federal Reserve could start cutting its benchmark rate next year after an easing in inflation. “The major reason for the recent rally is that Wall Street had convinced itself that the Federal Reserve is all done with hiking rates this cycle,” said Eddy Elfenbein, the manager of the CWS Advisor Shares Focused Equity ETF and blogger of Crossing Wall Street. “Investors now expect the Fed to start cutting rates in less than six months.” For what it’s worth, the Federal Reserve Chairman has not been so optimistic in his comments recently.

A rally in oil futures sent the S&P 500’s energy sector 2.1% higher, though oil prices have still fallen for four-straight weeks. With wars between Russia and Ukraine and between Israel and Hamas, an investor might expect oil prices to soar because of the potential for supply disruption. But that hasn’t happened. There are many reasons, but the leading argument is that OPEC sees an ideal selling price for crude, which Goldman Sachs oil analysis sees between $80 to $85 a barrel, based on production cuts in October 2022, April and June 2023. Oil futures finished higher on Friday, reversing most of a decline in the previous session that brought them to their lowest levels since July and pulled U.S. benchmark prices into bear-market territory.

Prices got a boost following a report from the Financial Times that said the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, may decide on additional production cuts when they meet on Nov. 26. In any case, it is providing a little relief at the pump.

The good news: Friday’s ongoing rally for stocks was making another quick correction exit look possible before the Thanksgiving holiday, helped along by a sharp retreat in U.S. Treasury yields since October. The market’s rally in the past three weeks has followed retreating bond yields and a wave of economic data that traders hope portends a so-called “Goldilocks” scenario in which inflation comes down while growth in the economy decelerates gently. David Donabedian, chief investment officer at CIBC Private Wealth US, has more confidence about inflation coming down than about a soft landing.

He points to recession indicators such as the inverted yield curve, the degree of Fed tightening, as well as a half-percent uptick in unemployment. He’s not convinced we face an outright recession, though he does think growth could be much slower next year, encouraged by the breadth of the market’s recent run, especially after mega-cap technology stocks linked to artificial intelligence made for a top-heavy run earlier this year. “If the market truly does broaden out, that would make me feel more comfortable that we may have a couple-year runway here of a durable bull market. We’re not there yet though.”

In other good news: The New York Fed showed that consumer expectations for 12-month inflation are now 3.6%, down from 3.7% a month ago. Construction of new homes rose 1.9% in October, as builders amped up new projects. The pace of construction increased as builders saw a pressing need for more housing units, with the resale market continuing to deal with a shortage. Housing starts rose to a 1.37 million annual pace from 1.35 million in October, the government said Friday. That’s how many houses would be built over an entire year if construction took place at the same pace every month as it did in October. Looking ahead, home-builder confidence was falling in November on the back of mortgage-interest rates approaching 8%, but it is likely to get back on track, as rates appear to be dropping as the U.S. economy slows. With rates falling, buyer demand is likely to bounce back. And given that builders are among the few who are adding new housing stock, they may ramp up starts in the months to come, barring any major weather events.

In case you are wondering if I have been taking happy pills… Moody’s downgraded its U.S. credit outlook to negative. Moody’s said that the “downside risks to the US’ fiscal strength have increased and may no longer be fully offset by the sovereign’s unique credit strengths.“ The first-time unemployment claims have risen; we still have an inverted yield curve, and the government averted a shutdown which some maintain is continuing the same game in Washington. Recession fears have been melting away but it is fair to say that the bulls are ruling the day now but there is enough to worry about that the bears are not in hibernation. Further, Americans keep racking up bigger credit-card balances. In the third quarter, the country’s credit-card debt burden hit a new record high of $1.08 trillion, according to the Federal Reserve Bank of New York. That was up $154 billion from the same period in 2022, the biggest year-to-year jump since the Fed started collecting the data in 1999. Delinquencies, too, are on the rise. The share of newly delinquent credit-card users — those that are at least 30 days past due on one account — rose to 2% in the third quarter, up from 1.7% in the first and second quarters of 2023. That’s the highest rate since at least 2015. Inflation is still present and still far from the Federal Reserve target of 2%. The New York Fed survey showed that consumer expectations for 12-month inflation are now 3.6%, down from 3.7% a month ago.

That being said, our defensive strategy has paid off and as we look toward this holiday season and the results of the ever expanding “black Friday” we will see if consumers, the primary driver of the economy, will show up and keep things going.


Enjoy your Thanksgiving and cherish the people in your life for in the end that is what matters.


Happy Thanksgiving