The stock market surged an unprecedented 9.1% in November, accounting for almost half of its 20% year-to-date returns in a single month. This price action can be partly attributed to lower inflation and a sense that global interest rate policies are effective. In the U.S., a recent jobs report showed fewer new jobs and an uptick in unemployment. Although negative for the economy, this adds to the sense that the Fed’s efforts to slow down inflation may indeed be successful.
In Europe, although the ECB expressed concerns over potential future inflation, the latest data from Eurostat indicates a decline in inflation to a manageable 2.4% year-on-year. Meanwhile, in Latin America, rates are being reduced from double-digit figures as the region leads the world towards an ‘easier’ monetary policy.
Will inflation be tamed, and are rate cuts imminent? Although statistics indicate central bank policies are effective, real-world expenses suggest otherwise. History demonstrates that controlling inflation is challenging. Moreover, there’s the question of whether heavily indebted nations actually prefer 5-6% inflation. While populism may advocate for combating inflation, for countries like the U.S., Japan, and parts of Europe, inflation can help reduce their significant debts relative to real assets. This might also explain the recent surge in gold and bitcoin prices, as investors, unconvinced that inflation will stabilize at 2-3%, are turning to the yellow metal as a hedge.
Tipping points in Equity, gold and crypto
At this point we have several ‘growth’ assets on a tipping point:
The SPY ETF is almost about to break to new highs. Or it can as easily hit resistance and bounce down and into a long sideways action.
Gold is at multi-year highs trying stubbornly for the 4th time to break out to all-time highs.
Bitcoin which can be considered a non-fiat, inflation resistant asset, is nowhere close to its all time highs but the charts hints at a junction as it hits $38,000. Right between the 16,000’s low and the 60,000’s high.
December is considered a seasonally strong month. It remains to be seen if December can add further strength to a market which just experienced a 9% burst.
Many of our strategies ride on equities as well as gold, so strength in both assets are good news.
Logical Invest strategy performances for the month
Let us know what you think in our forum.
The Logical-Invest team.