Following three months of weak performance, both equity and fixed income markets saw a sharp uptick in November after the Treasury declared that bond issuance would be less than previously projected. The rally persisted when inflation fell below economist forecasts. Throughout the month, Treasury yields decreased due to a combination of factors, leading to the best month of performance for bonds so far this year with only a month to go. Developed ex-US equities were among top performers for the month, while commodities were the worst-performing asset class for the month.

The “good news is bad news” trend continued in October. Real GDP increased significantly and payrolls were higher than anticipated, yet the S&P 500 recorded its third consecutive down month, the Equal Weighted S&P 500 fared even worse, and the Russell 2000 had its worst month since September 2022.

We maintain our existing tactical tilts: underweight U.S. equities, overweight short-duration fixed income/cash, and tilted towards value stocks in Large Cap U.S. and Developed non-U.S. The economic “bumpy road back to normal” highlights the challenges with establishing fair prices for assets in this environment where short-term interest rates are theoretically far from normal. There very likely could be some surprises still ahead of us.