November 2021 started on a high with both the Dow Jones Industrial Average and S&P 500 hitting all-time highs. It closed out the best month of the year in terms of US stocks, although there are still concerns about the relatively low earnings made from major tech brands such as Amazon and Apple. Plus with continued issues relating to supply chains, labor shortages and inflation, it could be a mixed end to a turbulent financial year.
Corporate earnings in October performed better than expected despite relatively lacklustre manufacturing data. Highlights on the S&P 500 included strong rebounds from energy firms, while there was even the return of meme stocks like AMC and GameStop on the Dow. Other high flyers included the likes of Lyft that reported much better than expected third-quarter figures. The NASDAQ also reported its best monthly performance of the year with a 7% gain.
Then there was the remarkable deal between Tesla and Hertz that saw the electric car manufacturer become one of the few trillion dollar companies. Even relatively traditional stocks like Caterpillar recorded positive figures alongside headline-makers like Microsoft and Alphabet. This was the month where Microsoft once again overtook Apple to become the world’s most valuable company. As such, investors saw over 80% of companies in the S&P 500 enjoying better results than many had estimated.
Problems lying ahead for US stocks
While October presented a rosy picture for US stocks, it’s clear that there remain some troubling issues ahead. In particular, the persistent supply chain issues hit major brands like Apple hard and put a dent in manufacturers’ output in many sectors. Much of this is focused on the shortage in certain kinds of computer chip, but it is a problem that is hitting many sectors hard. With the worst supply crisis in a generation, it is hoped that the general optimism about the US economy can override such problems.
Other issues hitting the economy include labor shortages and the threat of high inflation. In particular, Amazon said that labor shortages would negatively impact its earnings for the rest of the year. This forms something of a contrast to the news that 571,000 jobs had been added in the private sector.
Much will depend on key decisions on the Fed rate this week that is expected to generally be hawkish. The Fed is predicted to start the process of tapering bonus purchases this month and investors will be waiting to see when a first rate hike could be implemented.
Plus there is an important OPEC+ meeting that will discuss key matters regarding output that will have a major impact on how output could affect the ongoing supply chain crisis. It’s widely expected that the OPEC+ meeting will stick to July’s output plan. In addition to this, there were also worrying reports that US consumer spending hadn’t performed as well as expected in September. All of which means that the remainder of 2021 will be especially hard to predict.