by Gary Alexander
Dcember 5, 2023
November turned out to be one of the best months in recent market history, gaining 8.92% in the S&P 500, or 9.1%, counting dividends. The NASDAQ Composite gained double-digits, at +10.7%.
November was the sixth best month for the S&P in the last 30 years, according to Bespoke Investment Group, which posted this chart last Thursday, when the S&P was up 9.34%, on the intra-day opening.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
According to Bespoke, “The S&P 500 had its best month since July 2022, and only its 15th monthly gain of over 9% since the start of 1980. With November’s gain, the S&P 500 is up 13.8% over the last year, which is two percentage points better than the one-year average total return of 11.8% dating back to 1928.” But they sobered us up with this two-year total of virtually no change – in fact, down 0.8 points:
S&P 500 close on 11/30/23: 4,567.80
S&P 500 close on 11/30/21: 4,567.00
However, Bespoke assures us that, “Returns for the last five and ten years have been modestly above average, while the 20-year annualized gain of 9.7% is 1.2 percentage points below the historical average.”
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
December is Another Great Month in Market History
How about December? Bespoke reported that the S&P 500 has historically (since 1929) averaged a 1.3% gain in December, with positive performance 73.7% of the time. More specifically, “Years like this year, with both a 5%+ gain in November and a 15%+ year-to-date gain through the end of November, have averaged a stronger-than-normal 1.4% gain.” From Bespoke’s seasonality table, below, you can see that December ranks as the second strongest month (to July) over the past century, with an average gain of 1.52%, and positive performance 74% of the time (the best of any month), but December is less stellar lately (at #5). At the same time, the fourth quarter has gained in power in the last 20 years versus 100 years.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The fourth quarter has progressed from cumulative +2.96% average gains over the last 100 years to +4.43% over the last 20 years, and the fourth quarter now surpasses the gains in the first nine months.
Now, let’s turn our eyes to 2024 by looking back to some Greek words and their etymological roots:
Four Greek/English Words that Point to a Better 2024
Here are four four-syllable words of Greek origin that point to a better 2024, especially in America:
- Democracy (Demos = people; kratos = power): The election of 2024 could supercharge growth.
- Demographics (Demos = people; Graph = chart): U.S. labor force and immigration fuel growth.
- Economics (Oikos = household; Nomos = law or management): Business profits also fuel growth.
- Technology (Tekhno = art, craft, technique; Logos = study of): Scientific breakthroughs fuel growth.
Let’s tackle Technology and Economics first, as they usually supercharge each other:
First, let me repeat my alignment with Ed Yardeni’s main thesis, that we can create another Roaring ‘20s through technological innovation, in contradiction to the latest (19th) edition of the reigning Economics textbook (2010) by Paul Samuelson and William Nordhaus, which teaches that economics “is the study of how societies use scarce resources to produce valuable goods and services and distribute them among different individuals.” This definition hasn’t changed since the first edition was published in 1948.
In his excellent 2018 book, Predicting the Markets, Yardeni countered: “I’ve learned that economics isn’t a zero-sum game, as implied by that definition. Economics is about using technology to increase everyone’s standard of living. Technological innovations are driven by the profits that can be earned by solving the problems posed by scarce resources. Free markets provide profit incentives to motivate innovators to solve this problem. As they do so, consumer prices tend to fall, driven by their innovations. The market distributes the resulting benefits to all consumers. From my perspective, economics is about creating and spreading abundance, not about distributing scarcity. In other words, don’t worry, be happy!
Yardeni believes we can solve our biggest economic problems through technology and imagination. For instance, we can solve the global shortage of labor by boosting productivity through AI, automation and robotics. Also, I believe we can solve any climate crisis (real or imagined) by telecommunications (less travel) and cleaner energy through technological innovation, not draconian anti-growth policies. Ed Yardeni seems to agree, saying, “The federal government is implementing subsidies and penalties to force the reallocation of capital investments. Governments have a poor record of allocating resources.”
Yardeni cites the value of our soaring high-tech capital spending on IT equipment, software, and R&D in the U.S., rising to a record $1.84 trillion last quarter, and averaging around 50% of total capital spending since the pandemic, up from only about 25% during 1980 (see the two charts, below).
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Now, on to Demographics and Democracy:
Demographics favor the U.S. China’s population actually fell by 850,000 in 2022, their first decline in population since their Great Famine of 1960-61. In a land of 1.4 billion people, there were fewer than one million births (956,000) last year. The implications are widespread and massive. There are not enough young workers for their “Made in China” exporting colossus, nor enough workers to fund pensions and services for the massive army of infirm elderly. There is a deflationary collapse of property values.
The Shenzhen Real Estate stock price index peaked during 2020. It is down 52.5% since then, while the Chinese MSCI is down 54.5% since February 17, 2021. Both Chinese stock markets are flat since 2007:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Japan is also on a negative population curve – they are having fewer and fewer children – and neither China nor Japan generally accepts immigrants that aren’t of their “own breed”. They are “closed societies.”
Many European nations are also in demographic decline, and they are revolting against rapid immigration from Middle Eastern Islamic societies who do not wish to assimilate into European traditional values.
America, as many problems as we seem to have, is still the most welcoming nation for immigrants, and still has a relatively high birth rate. We also have the most mobile work force and the most business-friendly entrepreneurial structure for rewarding technological innovation, as witnessed by the percentage of new companies and scientific breakthroughs that originate here versus the rest of the world combined.
U.S. Household Net Worth (yes, that includes all debts) was $154.3 trillion as of mid-2023. Yardeni says, “There has never been a generation with as much in their retirement nest eggs as the Baby Boomers. Indeed, this cohort holds about half the $154.3 trillion in US household net worth.” A shocking (to me) 40% of U.S. homes (35 million households) are now mortgage free, many occupied by the newly retired.
Democracy will be the key next year. Voters weren’t mad enough at inflation and deficits in 2022 to throw their Congressional miscreants out of office, but maybe they will be next November. The sentiment polls seem to indicate a lot of discontent, but perhaps a decline in inflation, a higher stock market and some interest rate cuts next year will bring sunnier sentiment, wiping out that pessimism in time for most Congressional “drunken sailors” to continue over-spending into oblivion for the rest of the Roaring ‘20s.
That’s the big wild card for 2024. As Yardeni concluded, “With the benefit of hindsight, 2023 has been a year of nothing to fear but fear itself. In 2024, we may have to worry that there isn’t enough fear to temper investor optimism.” My biggest fear is that 2024 will be so good we won’t seek political change.
If we don’t alter the spendthrift politics of the 2020s so far, they will “Roar no More after ‘24*”
*Here’s one final Greek multi-root word: Politics: Poli = many; tics = bloodsucking insects.
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Fourth Quarter Started Slow, but It May Finish Strong
Income Mail by Bryan Perry
Stocks Building on Gains Under the Power Of Bullish Fund Flows
Growth Mail by Gary Alexander
After a Bountiful Thanksgiving, Will Santa Deliver Too?
Global Mail by Ivan Martchev
A “Reluctant Rotation” Has Begun
Sector Spotlight by Jason Bodner
Only You Can Prevent (or Profit From) Market “Forest Fires”
View Full Archive
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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