By Haddon Libby

With eleven months in the books, stocks are having a good year.  The Dow 30 is up 11% while the S&P 500 nearly doubles that at 20%. This time last year, the Dow was off 7% and the S&P 500 18%.  Most of this year’s gains came in November with the Dow up 8.8% and the S&P 500 9.1% higher.  This performance was one of the best for a November over the last 30 years.

This strong rally began after Chairman Powell of the Federal Reserve signaled that further rate hikes are unlikely.  In the days following Powell’s statement, yields on Treasuries fell by one-quarter of a point.

Where only a handful of stocks underpinned the market’s performance before November, relief that rates will not go higher rallied the valuations of smaller and financially weaker companies.


The Technology sector has returned to its winning way, up 51% through November after losing nearly one-third of its value in 2022.

Where the 500 largest companies as measured by the S&P 500 were up 20%, the Midcap index of the next 400 companies improved 6.5% with the 600 stocks of the Small Cap index advancing 7.3%.

Utilities have posted the weakest results in 2023, down 12% as higher interest rates hit the bottom line of these companies due to the debt levels owed by most companies in this sector.

Healthcare stocks are down 4.2% as COVID-era profits are no more yet operating costs remain elevated.  Drugmakers struggle as patents expire and more drugs become generics.  With healthcare providers and the government pushing for lower profit margins, this sector has struggled in 2023.

If the economy were to go into a recession, conventional thinking is that Consumer Staple stocks like Coca-Cola, Walmart and Procter & Gamble would outperform the rest of the market.  So far this year, Consumer Staples are down 3%

Excluding the United States, stocks globally are up 10% despite wars in Ukraine and the Gaza Strip.  The Eurozone is up 17%, Japan 12% and the United Kingdom 9%.  China continues to struggle following years of COVID lockdowns, and the withdrawal of wealthier companies and western investors from the country.  Add to that a real estate crisis like our Great Recession of 2008 and its economy struggles.

One way to get a simple gauge as to whether stocks are over or undervalued is to look at the Price-to-Earnings ratio.  Often called the P/E ratio, it is calculated by taking the price of a share of stock and dividing it by company earnings on a per share basis.  At the end of November, the 30 stocks of the Dow Index had a P/E ratio of 26 times vs. last year when the P/E ratio was 21.4x.  At first look, this increase suggests that the market is paying too much for stocks.  When you look at the 2024 estimated earnings of these 30 companies, the P/E ratio lowers to 19.3x versus 2022 when it was 18.5x.  This suggests that the market is willing to pay a little more this year as it looks like we will be avoiding a bad recession.  A more pessimistic future had the lower multiple versus the more optimistic one.

The S&P 500 remains a bit high with a 2023 P/E ratio was 19.7x through the end of November versus 19.1x in 2022.  The 2024 P/E ratio rises to 20.5x versus the prior year when it was 17.8x.  What the 20.5x multiple suggests is that earnings for these companies are expected to decline next year.  If the market move in November foreshadows better economic prospects for 2024, there is reason to believe that estimates may be low.

As it relates to interest rates, the market is forecasting a decrease of 0.5% in the Federal Funds rate to the 5% level.

Does the markets’ Thanksgiving feast preclude a December Santa rally?  My guess is that we will have a generally positive month unless some geo-political even derails market sentiment.

Haddon Libby is the Founder and Chief Investment Officer of Winslow Drake Investment Management.  As a reminder, this article is for entertainment purposes and is in no way investment advice.  For investment advice, talk with your advisor or contact us at

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