The year 2023 hasn’t been smooth for markets (and all of us, honestly). We’ve heard many experts' concerns about the poor outlook for shares, and it seems that stock indices have mostly declined. However, the reality is that the S&P 500, the Nasdaq, and the Dow Jones are headed towards their peaks for the year, with particularly strong growth in November. Let's explore the new factors influencing this situation and draw some conclusions.
The chart below illustrates how the main US stock indices have changed since the beginning of this November. Step by step, they have shown impressive dynamics. If you're interested in which specific stocks are performing the best today, you can check this list of the biggest gainers of the day.
The YtD chart reminds us that before November, the markets didn't seem very stable, experiencing a prolonged decline starting in the second half of the summer. Despite talks of a market bubble during this period, they weathered the instability and approached figures close to the year's maximum.
Even without discussions about the year’s highs, there are other achievements – just take a look at the current growth. More than a 45% increase for the Nasdaq index is substantial, and over a 17% rise for the S&P 500 is quite commendable as well. However, these significant numbers are largely attributable to the last few weeks. So, what exactly happened?
At the beginning of the month, the Fed’s meeting had a positive impact on stocks. The interest rate remained unchanged, and market participants got confirmation that the regulator wasn’t planning to increase it at the next event either.
The second supportive element for indices was credible reports from tech companies. Investors were generally pleased with the results they observed.
The last significant factor was the inflation data. Consumer prices for October turned out to be lower than expected, with the inflation rate slowing to 3.2%. A decline in price pressure gives the Fed fewer reasons to raise the interest rate. Therefore, the USD and US bonds become less attractive, and the stock market might draw more attention. In other words, the importance of risky assets has surged.
Following such news, many experts have raised the probability of the first decline in the interest rate in May 2024. The initiation of the decreasing key rate cycle by the Fed could bring about multiple changes in the stock market and Forex, you can imagine. However, can we be certain that it will happen in May? Probably not. That's why it's crucial to conduct your own research before making any trade decisions.
