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“If you place your head in a lion’s mouth, then you cannot complain one day if he happens to bite it off.” – Agatha Christie
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Investors have a lot to be thankful for this year, and a holiday-shortened week after what has been an eventful year so far is no doubt one of them. The economic and earnings calendars are relatively light this week, but Tuesday will be a relatively busy week for earnings, while Wednesday will be a busier day for economic data as government agencies look to get the reports out ahead of what, for many, will be a long weekend.
In Asia, Japan and India were both up over 1% while Chinese stocks saw modest losses. In Europe, it’s been a mixed tone, with the STOXX 600 basically unchanged. Here in the US, equity futures are higher, and treasury yields are lower in part due to Scott Bessent’s nomination as Treasury Secretary.
The last week of November has historically been positive for equities, and recent history hasn’t deviated from that trend. The S&P 500 has notched gains in the last week of this month in six of the previous seven years. The only down year was in 2021 when the S&P 500 fell over 2.6% as investors feared a resurgence of Covid from the Omicron wave and Fed Chair Powell sent a message to the market that the Fed was no longer not even thinking about thinking about raising interest rates. While the S&P 500 was near record highs heading into the week, both factors sent stocks plunging, and the S&P 500 fell 2.6% for its fifth worst last week of November in the post-WWII period and the worst since 1987. Outside of 2021, though, you have to go back to 2005 to find another year when the S&P 500 dropped over 1% in the last week of November.
Overall, the S&P 500’s median performance during the last week of November since 1945 has been a gain of 0.32% with positive returns 58.2% of the time which is nearly twice the average for all one-week periods since 1945. That’s the good news. The bad news is that in years when the S&P 500 has been up 20%+ YTD heading into the last week of November, the median gain has been more in line with the historical average (0.19%). When the S&P 500 was overbought (1+ standard deviation above its 50-DMA) heading into the last week of the month, the median performance was a decline of 0.20% with gains less than half of the time. Additionally, when the S&P 500 was up 20%+ YTD and overbought, the median performance during the last week was also a decline of 0.18% with gains half of the time.
None of these trends suggest that declines this week are likely, but for a week that has historically been considered one of the most positive weeks of the year, the setup this year is not necessarily as bullish.