Despite the many bullish milestones set by November's magnitude, the lesson of recent history for Wall Street is to tread carefully. Zhitong Finance and Economics learned that the market's expectation that the Federal Reserve is ready to ease monetary policy soon is gradually heating up, which has even stimulated cautious investors to break out into a cross-asset buying, ** bond yields have fallen, and speculators have poured into the most inconspicuous corners of the market, including MEME coins and technology stocks that have not yet made a profit.
In short, it's November. Market volatility has fallen to pre-pandemic lows. Goldman Sachs, a measure of global risk appetite, is near its highest level in two years. However, this happened in June and July, but then the US stock market fell by about 10%.
Will this time be different?Maybe. Despite Fed Chair Jerome Powell's push back on Friday against growing expectations of a rate cut, there is still a consensus that the Fed's historic tightening campaign is over. But at the same time,The rise in risk appetite is running counter to the Fed's goal of tightening financial conditions, and it is this back-and-forth dynamic that has led to the end of the past.
Dan Suzuki, deputy chief investment officer at investment bank Bernstein, said: "The changing narrative is impacting markets far beyond what fundamentals can warrant, on both fronts. "It's a constant process of switching between oversold and overbought. ”
As always, the extreme moves in the market are raising warnings about its sustainability. Hedge manager Bill Ackerman said optimism about the economy could be misplaced unless the Fed starts easing monetary policy sooner than many investors expected. He referred to the impact of so-called real interest rates, noting that as inflation comes down, real interest rates are rising and threatening the business cycle.
"I think there's a risk of a hard landing if the Fed doesn't start cutting rates soon," Ackerman said. He added that he was already seeing signs of a weakening economy.
By almost all standards, the market ** for November was huge. U.S. Treasury yields sharply set the stage for strength in credit markets, credit markets, and emerging markets, with the Bloomberg 60 40 index posting one of its best months on record. Indices tracking cryptocurrencies, initial public offerings (IPOs) and tech stocks that have yet to make a profit have risen sharply – asset classes that have struggled as Treasury yields soared. "Sister Wood" Kathy Wood's ARKK Innovation ETF rose a record 31% in November.
A strong market** comes at a delicate moment. While a slew of data released this week – from initial jobless claims, revised US Q3 GDP growth to consumer confidence – has cemented bulls, it's unclear whether the pullback in inflation signals a more durable economic slowdown. Data released on Friday showed that the ISM manufacturing PMI in the United States was 46 in November7, which was lower than expected, while the Atlanta Fed's GDP Now index expected U.S. growth to slow to 119%。
In addition to all the economic uncertainty, investors are also facing the same uncertain market dynamics this summer, namely the huge role played by the "Big Seven" in the US stock market. Even with a slight extension of gains in November, 68% of the S&P 500's year-to-date gains are still contributed by the top five gainers, while the top 10 gainers contribute 90% of the gains.
JPMorgan said this "narrow style of leadership" was common before the economic slowdown, and that the concentration of equity had reached levels not seen since the '70s. JPMorgan Chase & Co. strategists, led by Dubr**ko Lakos-Bujas, said: "Valuations are currently overpriced, volatility is near record lows, and geopolitical risks remain high. We expect weak global earnings growth to be from current levels.