WEEKLY MARKET UPDATE 12/8/2023

Stocks finished higher for the sixth consecutive week as Friday’s jobs report for November came in stronger than expected and the S&P 500 entered the weekend above 4,600 for the first time since March 2022.  Markets continue to benefit from signs of disinflation and this week we saw the biggest sequential decline in one-year inflation expectations from consumers since 2021, while the number of job openings (per JOLTS) fell to its lowest levels in over two years and added to speculation that the labor market is rebalancing itself from historically tight levels.  Next week will be headlined by November’s consumer price index (CPI) on Tuesday and Federal Reserve meeting announcements on Wednesday (no rate hikes expected).

LOW ENERGY

Markets are expecting next week’s CPI report to show headline inflation slowed to 3.1% year-over-year in November, down from 3.2% the month prior, and falling energy prices are likely to be a key contributor.  Crude oil has fallen for six of the last seven weeks and WTI crude tested $70 a barrel this week, its lowest levels since early July.  This selloff has notably coincided with OPEC+ efforts to deepen production cuts into 2024, but tepid demand from China and record US production have more than offset the oil cartel’s attempts to boost prices.  Gasoline prices have also fallen sharply, and the national average is now $3.18 a gallon (per AAA), the lowest levels since January, while many analysts are predicting the national average will dip below $3 by Christmas.  It is probably no coincidence that the biggest decline in consumer’s one-year inflation expectations since 2021 coincided with these low energy prices and we would love to see this trend continue into 2024.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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