November Commentary
GLOBAL MARKETS
Following two months of consecutive negative performance, global equity markets were resoundingly buoyant.
However, geopolitical tensions worsened, earnings languished, and interest rate expectations remain elevated.
US MARKETS - A strong month for US equities despite persistently elevated inflation numbers. US equities had a very strong month, sharply rising from yearly lows to provide investors with some respite in the face of persistently elevated inflation. Notable intra-month movers were S&P heavyweights Meta (-33%), Amazon (-9.4%) and Tesla (-14.2%), as consumer headwinds and earnings disappointments added further momentum to stock price reversions. The Federal Reserve is largely expected to hike policy rates another 75 basis points, with the US midterm results expected to become the defining factor in the determination of US fiscal policy over the next two years.
Up 8.0% (US 500)
UK MARKETS - Political change leads to market stability and falling government yields. The UK opted for political change, trading Liz Truss and Kwasi Kwarteng for Rishi Sunak and Jeremy Hunt as Prime Minister and Chancellor, respectively. Equities responded positively to a more orthodox fiscal approach and greater political stability, while yields declined on UK government debt. From a sector standpoint, consumer related sub-sectors, such as travel/leisure and tobacco, performed best. The Bank of England is expected to raise rates at the November meeting. However, the consensus for future hikes has softened, with the latest PMI data signalling the country is moving into contractionary territory already.
Up 3.0% (UK All Share)
EUROPEAN MARKETS - Markets performed well despite the continued hawkish approach of the ECB. In local currency terms, Europe enjoyed a strong rebound from year-long lows, and a strengthening currency proved to be an additional tailwind for foreign investors. Germany (+9.4%), France (+8.8%) and Spain (+8.2%) outperformed developed market peers as countries announced fiscal packages to combat rising energy prices. PMIs signalled that the eurozone was in contractionary territory, with manufacturing worst affected. On 27 October, European Central Bank (ECB) President Christine Lagarde added another 75 basis points to borrowing rates and announced a hawkish agenda in an attempt to return Eurozone inflation back to the 2% CPI target.
Up 6.3% (Euro 600 Index)
JAPAN MARKETS - Markets rebound from year-long lows while the Yen continues to fall. Japanese equities enjoyed a strong month of performance in local currency terms, yet continued falls in the yen has offset gains from a foreign investor standpoint. Much of the rally occurred in the retail and technology space (SoftBank alone, rising 26%). In the bond market, very little change occurred, with JGBs largely returning flat. October’s PMI reading signalled growing strength in the economy, with aggregate demand levels recovering toward pre-COVID levels. The Bank of Japan (BOJ) remains committed to maintaining a loose monetary policy agenda providing extra assistance to prevent further falls in the Yen versus peers.
Up 5.1% (Japan Index)