Will the November rally last through New Years?

The great challenge for investors this year is managing how they feel about the Fed. 

The working thesis for much of the year has been that the Federal Reserve would stop raising interest rates some time in 2023 and start to trim rates back in 2024. 

That mindset has dominated market thinking since the central bank held its key federal funds rate steady at its September and November meetings and hinted it was done. 

The done thing is not a done deal. Fed Chairman Jerome Powell has warned markets that if inflation reignites, the Fed will not hesitate to raise rates. The Fed's goal, officially, is to get U.S. inflation down to 2% a year from a high of 8% or so in 2022. Inflation is now a touch above 3%, which Wall Street thinks is good enough. 

And good enough to allow rates to come down next year. The CME Group's Fed Watch Tool projects the central bank will start trimming rates from its current 5.25% to 5.5% in March and down to 4.5% to 4.75% by December. 

That may be just Wall Street talking amongst themselves. 

The Fed could simply say, "We're done at 5% to 5.25%. End of story."

But predictable rates are almost as good as lower rates. The 10-year Treasury yield topped 5% in late October. It's now under 4.5%. 

The falling yield set off a stock-buying spree on Oct. 27 that continued this past week and should continue well into December.

How good a rally?

• The Standard & Poor's 500 Index  (^IN) - Get Free Report is up 7.64% this month, potentially its best monthly performance in a year. 
• The Dow Jones Industrial Average  (^DJI) - Get Free Report is also enjoying its best month in a year as well, up 5.73%. 
• The Nasdaq Composite Index  (^COMPX) - Get Free Report has jumped 9.9%, its best month since rising 10.7% in January. 

At this time, however, it's time to catch a breath. Markets have a few important earnings and economic reports to digest in the week of Nov. 20. 

But the reality of Thanksgiving week is that many traders and investors, money managers and traders will be disappearing in a big way starting after Tuesday's close. 

Except on Tuesday when chip giant Nvidia  (NVDA) - Get Free Report reports third-quarter results. The Street estimate is the company, a key piece of artificial intelligence development, will report earnings of $3.01 a share, up from 34 cents a year ago,

Also reporting Tuesday: home-improvement retailer Lowe's Companies  (LOW) - Get Free Report and medical-device maker Medtronic  (MDT) - Get Free Report, whose shares have slumped since May.

The most important economic report may be the leading economic indicators report on Monday and existing home sales on Tuesday. Always keep in mind: Buying a home means a fantastic amount ancillary purchases afterward.

Volume Wednesday will be very light. There will be a half day's trading on Friday, and whatever the results are, they won't mean much. 

So, it's time to think ahead to December. It's the biggest month for the Dow and the S&P 500 and the second most important month for the Nasdaq.

And then comes January and with worries that the U.S. economy will be slowing down, the potential for continued Middle East violence and, of course, the real prospect of bitterly contested elections across all of the United States. 

What markets are likely to do in December is to move higher but maybe not as outrageously as is happening in November. 

The Nasdaq-100 Index  (^NDX) - Get Free Report is less than 100 points below is 52-week high of 15,932.05, set on July 19. The index fell about 11.5% between July 19 and Oct. 26. It's up 12.7% since.

A number of major stocks suddenly hit new highs. New 52-week highs basically disappeared in October.

Microsoft  (MSFT) - Get Free Report set four new 52-week highs between Nov. 10 and Nov. 17.  Chip giant Intel  (INTC) - Get Free Report suddenly surged and hit multiple new highs as well. 

Among the others hitting new highs were General Electric  (GE) - Get Free Report, Ross Stores  (ROST) - Get Free Report, truck manufacturer PACCAR  (PCAR) - Get Free Report, ride-share giant Uber Technologies  (UBER) - Get Free Report, credit-card company Visa  (V) - Get Free Report and cloud security company Zscaler  (ZS) - Get Free Report, German sandal maker Birkenstock, chip maker Advanced Micro Devices  (AMD) - Get Free Report and Costco Wholesale  (COST) - Get Free Report. 

Many companies reported solid profits or convinced investors better results were coming. Target  (TGT) - Get Free Report jumped 19% on the week because third-quarter profits grew from a year ago, even as sales fell. Macy's   (M) - Get Free Report was up 31%. 

There are risks to this rosy scenario that may come to the fore. 

A wild card that erupted at the end of last week -- the ouster of Sam Altman as CEO of ChatGPT, the artificial intelligence company -- could spread across Silicon Valley. (Reports late Saturday suggested investors in ChatGPT are trying to get Altman brought back.)

Other risks: 

• Stocks could get too pricey. Not only are 52-week highs flowering, but stocks could become overbought and vulnerable to a selloff. 
• The Fed could surprise every one and raise rates at its Dec. 12-13 meeting, the last of 2023, or its first meeting of 2024 on Jan. 30-31. 
• The Middle Eastern violence could spin out of control and send oil prices soaring. For the record, crude is off 5% or more in November after a similar tumble in October. The U.S. national prices of gasoline is fallen for 59 of the last 61 days and is down more than 10% since the end of October.  
• Congress, which managed to avoid a partial government shutdown just this past week, could collapse into chaos. 
• The Ukraine-Russia War could expand rapidly.