Dec 4, 2023 - Economy

Rate cut hopes drive S&P to best month of year

Data: FactSet; Chart: Axios Visuals

The S&P 500 clambered to a new 2023 high on Friday — extending November's surprising strength into the first trading day of December.

The big picture: The index's nearly 9% gain last month was the best showing for the stock market since July 2022.

Between the lines: It's actually the bond market that's been the driving force behind the rally in stocks.

  • After hitting 5% in October the yield on the 10-year Treasury note dove to 4.25%, where it now sits.

Be smart: All else equal, a sharp drop in Treasury yields lifts stock market valuations (and a sharp increase in yields hurts valuations). That seemed to be what happened in November.

What to watch: Whether FOMO starts to gather momentum in the markets as we approach year-end, with once bearish money managers buying stock to ensure they don't fall short of the benchmark they're measured against.

  • It could be a recipe for the mother of all year-end rallies.

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