NYSE MAC Desk - December 2 Weekly Recap

DOW 34,430 (+35), S&P 500 4,072 (-5), Russell 2000 1,893 (+11), NYSE FANG+ 4,961 (+44), ICE Brent Crude $85.55/barrel (-$1.33), Gold $1,811/oz (-$4), Bitcoin ~16.9k (+105)

Coming into this week major US indices had spent the previous two weeks consolidating in a tight range following the better than expected CPI data. Last week in holiday shortened trade both the S&P 500 and the Dow Jones Industrial Average rallied ~1.5%  testing the upper end of that range. We started off the week giving back most of those gains ahead of Chair Powell's speech at the Brookings Institute and this week's employment data. Those catalysts created some volatility but at the end of the day major indices ended the week modestly higher with the S&P 500 and Russell 2k up ~1% while the Dow Jones Industrial Average ended the week around unchanged.

Throughout this year we have been talking about seasonality associated with midterm election years. Heading into October we had highlighted that the seasonal headwinds were turning into tailwinds given the very strong historical return profiles of October/November. That has played out with the S&P 500 rallying 8% in October followed by a 5.4% rally in November. Broadly speaking December tends to be a good month for equity markets, as Santa Claus comes to town, but the track record in mid-term election years is not quite as strong. Since 1970 in December following a midterm election the average return for the S&P 500 is 0.4% up ~60% of the time relative to a 1.9% average gain up in ~80% of instances in non midterm years (see updated chart below).    

The big outperformer this week was the NYSE FANG+ index which ended the week higher by >7% driven primarily by gains in the China components, as both BABA/BIDU ended the week up >20%. China has been a focal point for the last few weeks and despite ongoing protests markets have continued to rally as there are signs that the government is taking incremental steps to ease its Covid policy and support their property markets.  The Hong Kong Hang Seng Index was up >6% this week capping off a 26.6% rally in the month of November. The China Shanghai Composite was up 1.9% this week and ~9% last month.

Read the rest of the weekly recap here