Last week we closed the books on November and as we did the stock market received a life preserver from Federal Reserve Chair Jerome Powell. That rescued stocks from turning in an across-the-board negative performance for the month. Powell's comments eased the market's concern over the pace of rate hikes in 2019 and the subsequent Fed November FOMC meeting minutes served to reaffirm that. Recent economic data, however, has painted a picture of a slowing domestic growth, giving the Fed ample room to slow its pace of rate hikes.
Despite Powell's late-month "rescue," quarter to date the stock market is still well in the red no matter which major market index one chooses to look at. And as much as investors may like the action of the past week, the decline quarter to date has erased much of the 2018 year-to-date gains for the overall market.
Year to date, the Real Money Post-Industrial Average (RMPIA) finished November up slightly over 11%. For the month of November RMPIA climbed 1.2% month over month, led principally by shares of Starbucks (SBUX) , CVS Health (CVS) , Biogen (BIIB) and Amgen (AMGN) . All told, of the 30 RMPIA constituents 24 were in the green for the month. Of the six that weighed on the index's performance, the greatest influence was had by Apple (AAPL) shares as they fell more than 18% in November. The average's performance for the month was also impacted by Facebook (FB) , Netflix (NFLX) and Qualcomm (QCOM) . Given those holdings, it should come as no surprise the Nasdaq was up modestly in November, but the more diversified constituent base enabled RMPIA to easily outperform that market index for the month.
As we enter December, we have fresh signs of a pick-up in the domestic economy, courtesy of the November ISM Manufacturing Index, which also depicted softening inflation. Following the G-20 summit and meeting between President Donald Trump and Chinese President Xi Jinping, news of a U.S.-China trade truce sent the domestic stock market higher.
What this agreement means is that for a period of time -- as the two countries look to hammer out a trade deal -- the U.S. will leave existing tariffs of 10% on more than $200 million worth of Chinese products in place rather than increase them to 25%. If after 90 days the two countries are unable to reach an agreement, the tariff rate will be raised to 25% percent.
We'll take the positive performance these two events will have on the index; however, it's not lost on us that issues remain. These include the slowing global economy that is allowing the Fed more breathing room in the pace of interest rate hikes as well as pending Brexit issues and the ongoing Italy-EU drama. New findings from Lending Tree (TREE) pointing to consumer debt hitting $4 trillion by the end of 2018, $1 trillion higher than less than five years ago and at interest rates that are higher than five years ago. And while oil prices have collapsed, offering a respite at the gas pump, we are seeing more signs of wage inflation that along with other input and freight costs will put a crimp in margins in the coming quarters.
On the U.S.-China trade front, the new timeline equates to three months to negotiate a number of issues that have proved difficult in the past. These include forced technology transfer by U.S. companies doing business in China; intellectual property protection that the U.S. wants China to strengthen; non-tariff barriers that impede U.S. access to Chinese markets; and cyber espionage.
At the end of the day, what we need to see on the trade front is results -- that better deal President Trump keeps talking about -- rather than promises and platitudes. Until then, the existing tariffs will remain, and we run the risk of their eventual escalation if promises and platitudes do not progress into results.
Before we get to that point, we have the holiday shopping season in front of us for the next several weeks. With its holdings in MasterCard (MA) , Starbucks, Costco Wholesale (COST) , Alphabet/ Google (GOOGL) , Nike (NKE) and Amazon (AMZN) , RMPIA is well positioned for holiday shopping to be very good. As the National Retail Federation's consumer survey indicates, shoppers are expected to spend 4.1% more this year than during the November-December 2017 period. Already Amazon has shared that Cyber Monday was its strongest selling day ever, and odds are we will see more positive holiday shopping data in the coming weeks.
As of the market close on Friday, November 30th, since inception at the end of May 2016, the Real Money Post Industrial Average was up 40% vs. 31.6% for the S&P 500 and 23.6% for the Dow Jones Industrial Average.