Business Monthly Economy Review Nov 2023

"As we close out November 2023, it's time to review the key events and trends shaping the economy and impacting businesses this past month. With inflation persisting but showing signs of easing, the Fed continuing rate hikes, mixed jobs reports, and fluctuating gas prices, it's been a volatile period across industries. Here is a rundown of the critical factors, challenges, and opportunities business leaders need to know heading into the year's final stretch.

Economy

Key Events in November:

• The Federal Reserve raised interest rates 0.75% for the fourth consecutive meeting, taking the federal funds rate to near 4%. While acknowledging potential economic slowing, the Fed signaled it will keep hiking rates to combat stubborn inflation.
• The October jobs report showed 261,000 jobs added and unemployment rising slightly to 3.7%. Job growth is decelerating but remains resilient even as Fed tightening slows activity. Wage growth also eased.
• October's Consumer Price Index rose 0.4% from September and 7.7% year-over-year. Inflation ticked down but core costs stripped of food and energy both increased sharply on a monthly basis.
• Falling gas prices offered consumers relief. The national average for a gallon dipped below $4 and is down more than 5% from October as oil prices slid. This may ease overall inflation next month.
• Retail sales rose 1.3% in October, surpassing forecasts. However, excluding gas and autos, spending was flat as higher prices discouraged discretionary purchases. Holiday sales kick off in earnest.

Key Industries & Impacts:

• Housing starts fell sharply as rising mortgage rates near 7% reduce affordability. Permits for future projects also declined. Homebuilder stocks plunged on expectations of further slowing demand.
• Semiconductor stocks sank on weak earnings and guidance amid inventory corrections. Top firms like Nvidia, Qualcomm, and Micron are cutting production as electronics demand cools globally.
• Travel stays robust with airports crowded over Thanksgiving. Leisure and hospitality added jobs in October, though business travel remains below pre-pandemic levels. Airlines grapple with capacity constraints.
• Manufacturing activity contracted for the first time since mid-2020 according to the ISM Manufacturing Index. The strong dollar exacerbated supply chain issues and input costs.

For investors seeking exposure to the dynamic technology sector, a few mutual funds stand out for long-term performance and diversified holdings in top tech companies.

Fidelity Select Software & IT Services Portfolio (FSCSX)

With major holdings like Microsoft, Apple, Visa, and Accenture, this 5-star fund focuses on leaders in software, consulting, and services. FSCSX provides targeted yet balanced exposure to tech.

Morgan Stanley Institutional Technology Portfolio (MTECX)

This large cap growth fund maintains significant positions in Apple, Microsoft, Amazon, Alphabet, Meta, and Nvidia. MTECX offers core tech sector exposure.

T. Rowe Price Science & Technology Fund (PRSCX)

A diversified mix of stocks across tech industries gives this 5-star fund stability through varied market conditions. Top holdings include Apple, Microsoft, Amazon, and Alphabet.

ARK Innovation ETF (ARKK)

This aggressive growth fund identifies disruptive tech innovators. Top holdings are Tesla, Zoom Video, Roku, Shopify, and Square. Higher risk, higher potential reward.

The technology sector has faced volatility in 2023 amid rising rates and macroeconomic uncertainty. But some tech funds have navigated the turbulence well. Here are top performing tech mutual funds year-to-date:

Fidelity Select Software & IT Services Portfolio (FSCSX) – Up 4.5% YTD

T. Rowe Price Global Technology Fund (PRGTX) – Down -22.4% YTD

Fidelity Select Semiconductors Portfolio (FSELX) – Down -29.6% YTD

ARK Innovation ETF (ARKK) – Down -48.6% YTD

Baron Opportunity Fund (BIOPX) – Down -31.5% YTD

Software and services funds like FSCSX have shown resilience compared to more speculative tech funds this year. Semiconductor funds also face inventory oversupply challenges.

The highest performing mutual funds this year represent a mix of sectors and strategies:

Parnassus Core Equity Fund (PRBLX) – Up 10.8% YTD

Focused on companies with strong ESG profiles. Top holdings are Microsoft, Capital One, and Danaher.

Fidelity Select Defense & Aerospace Portfolio (FSDAX) – Up 1.3% YTD

Concentrated fund benefiting from defense spending. Heavily invested in leading contractors.

PGIM Jennison Health Sciences Fund (PHLAX) – Down -6.4% YTD

Biotech and pharma stocks offer stability for this top-ranked health sector fund.

Fidelity Select Software & IT Services Portfolio (FSCSX) – Up 4.5% YTD

Leader among tech sector funds year-to-date. Invested in giants like Microsoft and Apple.

Fidelity Select Energy Portfolio (FSENX) – Up 59.4% YTD

Oil and gas stocks drove huge returns for this energy sector fund.

Diversifying across sectors and limiting volatility has paid off in 2022’s unfavorable environment.

Mutual funds offer a smart way for investors to gain broad market exposure and diversify holdings. There are 4 primary types:

Stock Funds - Invest primarily in stocks across sectors, industries, and companies. Offer appreciation but higher volatility.

Bond Funds - Hold portfolios of bonds issued by governments and corporations. Provide fixed income and dividends.

Money Market Funds - Very liquid funds that invest in short-term debt instruments. Preserve capital with minimal risk.

Target Date Funds - Hold a mix of assets that adjust over time toward conservative allocations as the target year approaches.

Within these broad categories exist more focused fund strategies like index funds, actively managed funds, balanced funds, international funds, and more. Choosing funds that align with your risk tolerance and goals is key.

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