The U.S. markets were able to finish the month of November in positive territory thanks to a strong last week of the month. The S&P 500 returned 2.04 percent during November (4.91 percent coming in the last week); the index is now positive by 5.11 percent year-to-date. Emerging market stocks had a strong month after finishing positive by 4.12 percent, its first positive month in three months. The EM index is still negative by 12.24 percent for the year. The international developed index, the MSCI EAFE NR lost 0.13 percent during the month and is off by 9.39 percent year-to-date.

Bond yields moved higher during the first week of the month which was concurrent to the market continuing its October sell-off. After the first week, interest rates began to fall and finished the month lower than where they began the month. The Barclays Aggregate Index finished the month positive by 0.60 percent for the month but remains negative by 1.79 percent for the year. The high yield index fell by 0.86 percent during the quarter and is slightly positive for the year.

There was some positive news from the consumer during the month as the unofficial kick-off to holiday shopping started over the Thanksgiving Day weekend. The National Retail Federation expects to see holiday sales to increase by between 4.3 and 4.8 percent over last year’s numbers. With a low unemployment rate and rising wages, it’s not surprising for consumers to spend more freely this holiday season. U.S. consumer spending for October was high, increasing by 0.6 percent, the highest in seven months.

Unfortunately, the markets are still concerned about the potential trade war with China and the rate of future interest rate increases by the Fed.

As the month of November came to a close, the United States, Mexico and Canada signed a pact to replace NAFTA at the G-20 Summit in Buenos Aires. In addition to the progress made between the North American nations, President Trump is expected to meet with President Xi of China. There is no deal expected to be announced during the meeting; the markets are looking for some news that the two nations are willing to work out an agreement before President Trump pushes through additional tariffs in January and eventually placing tariffs on all goods coming from China. The trade discussions with China are a major concern among economists and investors. The current tariffs appear to be hurting the Chinese economy more than the U.S. economy, but certain U.S. companies are closing plants or laying off workers and using tariffs as the reason for these decisions. It is also estimated that further escalation of tariffs on Chinese goods could shave around one percent off next year’s already falling GDP number.

Just a few weeks ago the Federal Reserve seemed prepared to raise interest rates in December and three times during 2019. These expectations, the rising of current rates and the threat of a slowing economy have spooked markets and caused leading Fed officials to slightly “walk-back” these expectations. After a speech given by Chairman Powell near the end of November, market expectations have been adjusted to expect only one hike in 2019 following the hike in December. This could be good news for the economy short-term, though if inflation begins to creep up above its current level, which is the Fed’s target, then the Fed may feel pressured to hike rates faster.

The oil markets were also a major focal point during the month. WTI Crude Oil fell from the mid-70s in early October, briefly going below $50 per barrel and finishing the month just above $50. There has been rising supply as the United States, Russia and OPEC-members continue to produce inventory despite the slowing demand for oil. OPEC and Russia are scheduled to meet on December 6^th and 7^th and a significant part of their conversation will be around potential production cuts. The conclusion of this meeting will have a large impact on the direction of oil prices in 2019.

As we enter the final month of year, expect markets to focus on three things: signals from the Fed, on China trade talks and whether retail sales meet forecasts in the holiday season. It’s clear that stocks have become more sensitive to bad news lately, so investors should prepare for additional volatility ahead.

Get Monthly Insights Delivered to Your Inbox

Subscribe to our Investor Insights Newsletter today and get insights like these delivered directly to your inbox each month.