Betting on a November Rally

November 6 to 10, 2023


Betting on a November Rally

November 6 to 10, 2023


Market Recap

  • Equity markets rallied this week alongside a sharp retreat in bond yields. The S&P 500 rose 5.9%, led by banks and consumer discretionary.
  • The Federal Reserve left interest rates unchanged, as widely expected, and market expectations that they are done tightening continued to firm.
  • Meantime, the October payrolls report landed just right, with a 150k increase in jobs, a one-tick move up in the jobless rate (a little more slack helps at this stage), and cooler wage growth. In an instant, the punishing selloff in the Treasury market has turned, at least for now, with 10-year yields down almost 50 bps from when they touched 5% in mid-October.

The Fed

Last week, the U.S. Federal Reserve (Fed) opted to hold interest rates steady, following through with a much-anticipated pause and causing markets to rally. Fed Chairman Jerome Powell’s comments were constructive because even though they included both hawkish and dovish perspectives, they provided additional clarity. First and foremost, Powell highlighted that higher interest rates are having their intended effect on the economy. As such, the Fed is less concerned about rising inflation than they are about the pace of it coming down. The indication from the meeting is that, as opposed to rationalizing why they should stop, they are not asking why they should raise further—a nuance that seems to imply that they’ve done enough to justify no more rate hikes. Our analysis is that Powell is willing to trade no more rate increases for a broader acknowledgement that rates will stay higher for longer—in other words, that more hikes can be avoided as long as markets realize that cuts won’t be happening in the near future. Equity markets reacted positively to this news and the U.S. dollar (USD) stayed strong, while on the bond side, the 10-year Treasury yield came down dramatically.

Bottom Line: There is momentum in markets following the Fed’s most recent announcement, which potentially sets the stage for a Q4 rally.


Last week also saw a historic agreement reached between the United Auto Workers (UAW) and Detroit’s Big Three automakers—Ford, General Motors, and Stellantis (which owns the Dodge and Chrysler brands). Obviously, whenever a labour dispute ends, that’s positive news. For the automakers, it means that their costs have gone up, but on the bright side, they were able to avoid supply disruptions thanks to built-up inventory and now they’re able to move forward with a deal in place. This is an important resolution—we’d been worried about the potential for a series of labour strikes across sectors that would, in essence, hold the U.S. economy hostage. Thankfully, that never materialized. Other strikes in the automotive industry and other sectors continue, but this was the big one, and in our view, the others don’t hold the same potential for economic disruption.

Bottom Line: With a resolution to the UAW strike in place, potentially severe economic consequences across sectors have likely been prevented.

Emerging Markets

What’s the outlook for Emerging Markets (EM)? Let’s take a closer look at a few key economies. To start, Mexico is an economy that has benefitted from issues in China, with the United States and Canada turning to it as an alternative. This means, however, that Mexico is now tied at the hip with its northern neighbour, meaning it could be negatively impacted by any recession that occurs in the U.S. India is another economy that has benefitted from shifting supply chains, and both its population and wealth can be expected to continue to grow. China, conversely, is an economy in the crosshairs, with geopolitical risks, supply chain hiccups, and the failure to bounce back from COVID like other economies all contributing to negative investor sentiment. The primary concern is the property sector, which has sapped consumer confidence. The government has not intervened in the crisis as much as Western governments likely would have, and that’s been a real differentiator in terms of weakening consumer demand and slowing growth in the short term. Finally, Japan is the oddball—it hasn’t followed the herd when it comes to central bank activity, and it doesn’t feel the need to borrow from anyone else’s playbook. We expect this approach to continue, but its dive back into interventionism is worth monitoring. As such, we have reduced our emerging market exposure to an underweight.

Bottom Line: Given the current state of China in particular, we’re feeling somewhat less bullish on EM than we have in recent months.


In our most recent monthly meeting, an important discussion was around whether we thought a rally could occur heading into the holiday season after the setbacks in markets during September and October. Our answer is yes, and as such, we have moved to an overweight to equities. We also think that the time is right to move back to the broad S&P 500 versus an equal weight index as we think the technology names have room to run again. As always, we’ll continue to examine opportunities and reposition as needed.


The viewpoints expressed by the Portfolio Manager represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. Past performance is no guarantee of future results. This communication is intended for informational purposes only.

BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus.

This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

Commissions, management fees and expenses (if applicable) all may be associated with investments in mutual funds. Trailing commissions may be associated with investments in certain series of securities of mutual funds. Please read the fund facts, ETF facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Distributions are not guaranteed and are subject to change and/or elimination.

For a summary of the risks of an investment in the BMO Mutual Funds, please see the specific risks set out in the prospectus. ETF Series of the BMO Mutual Funds trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

®/™Registered trademarks/trademark of Bank of Montreal, used under licence.


Sadiq Adatia
Sadiq Adatia
May 21, 2024

Walmart Hit Record Highs. Will Other Companies Follow?

Are Walmart’s strong earnings an indication of how consumers are spending? Will cooling inflation data affect the schedule for rate cuts?
Steven Shepherd profile photo
May 16, 2024

BMO ETF Portfolios’ May commentary: “Jerome and the very topsy, turvy market”

Following a stormy April, markets returned to the “bad news is good news dynamic”, following the U.S. Federal Reserve Board’s decision to hold rates…
House view
May 15, 2024

The Fed’s Last Stand: A Solitary Rate Cut Expected for 2024

As Spring begins to fade, the continuation of uncertainty on interest rate cuts remains of paramount importance.
Sadiq Adatia
Sadiq Adatia
May 13, 2024

The Secret Recipe for an Earnings Rally

Is it resilient earnings or weak outlooks that are driving markets? Do business owners expect the economy to weaken?
Sadiq Adatia
Sadiq Adatia
May 6, 2024

Hunting for Clues in Corporate Earnings

What do Starbucks and Apple’s earnings results reveal about consumer strength? Has the market accepted that only one rate cut is likely in 2024?
Sadiq Adatia
Sadiq Adatia
April 29, 2024

The Tesla-Meta Paradox

What do Tesla and Meta’s earnings announcements mean for markets? Will sticky inflation alter the interest rate outlook?

Website attestation

you are entering the BMO Global Asset Management (GAM) Institutional website.

Read our Terms and Conditions
Click here to contact us

This information is for Investment Advisors only. By accepting, you certify that you are an Investment Advisor. If you are NOT an Investment Advisor, please decline and view the content in the Investor or Institutional areas of the site. The website is for informational purposes only and is not intended to provide a complete description of BMO Global Asset Management’s products or services. Past performance is not indicative of future results. It should not be construed as investment advice or relied upon in making an investment decision. The opinions expressed are subject to change without notice. Products and services of BMO Global Asset Management are only offered in jurisdictions where they may be lawfully offered for sale. The information contained in this website does not constitute an offer or solicitation by anyone to buy or sell any investment fund or other product, service or information to anyone in any jurisdiction in which an offer or solicitation is not authorized or cannot be legally made or to any person to whom it is unlawful to make an offer of solicitation. All products and services are subject to the terms of each and every applicable agreement. It is important to note that not all products, services and information are available in all jurisdictions outside Canada.