The stock market experienced a remarkable turnaround in November, with the S&P 500 (SPX) closing the month with a nearly 9% gain, and the Nasdaq registering an impressive 11% increase. Investors are now pondering if there is the potential for a Santa rally. Big tech leaders, particularly those in the “magnificent 7,” have spearheaded the upward trend following a 3-month correction that concluded in October. Initially, concerns arose about the rally being confined to major players, fueled by worries that high-interest rates might adversely affect smaller companies. However, as economic resilience and cooling inflation became apparent, these fears diminished, leading to a broader market rally.
The rally’s expansion to encompass a more diverse range of stocks is evident in the performance of Cathie Wood’s Ark Innovation ETF (ARKK), which surged by over 34%. Meme stocks also surged as well as cryptos, signaling a belief among investors that the Fed might not only halt rate hikes but could potentially cut rates. This prompted a “performance chase” in interest rate-sensitive sectors throughout the month, a trend that may persist until the year’s end.
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In November, our long-term investment portfolio yielded a return of 13.06%, resulting in a cumulative gain of 86% since May 2020. In parallel, our dynamic investment portfolio performed well, achieving a gain of 13.22%, contributing to an overall return of 37% since May 2020 (refer to our latest performance report). As predicted in the previous quarter, our structured note portfolio demonstrated notable improvement in the context of exiting investments, driven by positive trends observed in November. Given the outstanding performance of Cathie Wood’s Ark funds in recent times, we anticipate that the weakest performer in our structured note portfolio, linked to the Ark’s fund, will also experience significant improvement in alignment with this bullish trend.
Despite the strong momentum, the market has technically become significantly overbought, with signs of “FOMO” (fear of missing out) evident as both stocks and cryptocurrencies post their best month in a year. Emphasizing the importance of focusing on strong fundamentals rather than chasing hot meme stocks, we anticipate solid portfolio performance. While the market’s unpredictability makes timing challenging, jumping out prematurely during a bullish shift can result in missed opportunities. Caution and strategic, long-term investment approaches remain key in navigating the current market dynamics.
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