November’s investment market commentary

November was another good month for markets, with US stocks posting the first back-to-back monthly gain since 2021.The last day of the month was especially strong for US markets (with the S&P 500 posting a +3.1% gain). Sentiment was supported, as in October, mainly by a decline in expectations for interest rate increases, with speculation that central banks (specifically the Federal Reserve) would start to ‘pivot’, become less hawkish and start to slow the pace of rate increases. Lower-than-expected US consumer price inflation data for October (US CPI +7.7% vs. +7.9% expected) released early in the month helped to support this view. While a relatively dovish speech by Federal Reserve chairman Jay Powell on the last day of the month caused a sharp jump higher in stocks. In his speech, Powell suggested that it may be appropriate to moderate the pace of interest rate hikes as soon as the December meeting (which the market took to mean a 0.50% rather than a 0.75% increase in the policy rate).

Another positive for the markets in November stemmed from China, where official announcements seemed to suggest that they were slowly moving away from their zero Covid-19 strategy, despite paradoxically seeing a recent surge in case numbers. The strict regional lockdown policy followed by China, has negatively impacted economic activity and taken its toll on the population judging by recent protests (which are very rare) criticising the government and calling for the rules to be eased. The problem is that much of China’s elderly population is relatively unvaccinated, and any renewed push to change this will take time.

Global equity markets (+6.3%) were up sharply on the month. The slight loosening of Covid-19 restrictions in China, meant Asia ex-Japan (+15.5%) and broader emerging markets (+11.7%) were the best performing regions, while US (+5.4%) and Japan (+3.0%) lagged. In terms of style, there was little difference between value / cyclical stocks (+7.9%) and the more growth-oriented equities (+7.7%). This was also reflected in positive sector performance across the board, although materials (+14.0%), real estate (+9.9%) and industrials (+9.3%) were the best performing areas. At the other end of the spectrum, energy (+3.7%), and healthcare (+5.8%) lagged.

Within fixed income markets, lower central bank interest rate expectations and a strong rally in equity markets meant both government bonds and credit performed well over the period. Looking at the detail, while global government bonds rose (+1.7%) the more fiscally prudent UK Autumn Statement helped UK government bonds (+2.8%) outperform, with UK yields falling back towards pre-mini budget levels. Elsewhere, global investment grade credit (+4.4%) rallied strongly helped by tightening spreads and falling bond yields, as did global emerging market debt (+7.0%). Interestingly, it was global high yield (+3.3%) that underperformed other credit markets.

In terms of real assets, property in the form of global REITs (+6.8%) and global listed infrastructure (+3.4%) both generated good returns albeit slightly less than equities over the month. Commodities (+2.7%) also rose in November, but for a change this was led by industrial metals (+14.5%) rather than crude oil (-5.3%), with metals such as copper rallying strongly on optimism about a relaxation of China’s Covid-19 policies. The pronounced weakness of the US dollar against most major currencies and lower interest rate expectations were both very supportive for gold (+6.8%) over the month.

This month’s values quoted as at 30/11/2022. The above values are sourced from Bloomberg and are quoted in the relevant currency.