It is pleasing to start our November market commentary by stating that both Equities and Bonds rallied throughout the month. Slowing global inflation on both sides of the Atlantic strengthened market sentiment that we may have now reached peak interest rates, with growing expectations of possible rate cuts for 2024.

This has been boosted by falling energy prices. Despite the geopolitical situation threatening oil production, supply and the available market participants, we have now seen the price of oil fall lower than before the conflict in the Middle East and even before Russia’s invasion of Ukraine in February 2022.

In the US, driven by the ‘Magnificent Seven’ (Tesla, Microsoft, Meta, Apple, Google, Nvidia and Amazon), all three major US equity indices regained their footing in November with the S&P enjoying its 18th best-performing month since 1950 (which equates to 886 months!) growing 8.9% in USD dollar terms.

The strength of the US economy continued to paint a mixed picture. Third quarter GDP growth was shown to beat expectations at 5.2%, whereas nonfarm payroll data came in 30,000 below expectation at 150,000, and significantly down from 297,000 previously reported. Markets digested this news as an indication that recent interest rate increases are helping to slow down economic activity and thus reducing the need for further rises.

In Europe, Eurozone inflation fell to 2.4% from 2.9% in October, marking the lowest monthly figure since July 2021. This has been driven predominately by falling energy and food costs. The easing price pressures have prompted hopes that the Eurozone may be the first region to cut interest rates in 2024 to boost the chances of greater economic activity.

Whilst Jeremy Hunt presented his Autumn Statement to Parliament in November (which you can read more about in our Autumn Statement Guide), inflation fell sharply from 6.7% to 4.6% allowing the FTSE All Share index to grow by 3.0%. This growth was concentrated within smaller to mid-cap companies as strong Sterling performance held back the internationally exposed larger companies.

Asia Pacific stock markets rebounded across the board with South Korea, Taiwan and the Philippines emerging as the strongest markets. Gains within China’s equity market were more modest, due to the ongoing crisis within the Real Estate sector, and fear stimulus measures by the Chinese government will be insufficient to spur on growth.

On the back of changing interest rate expectations, Global Fixed Income markets performed particularly well, registering their strongest monthly performance since the 2008 financial crisis. Fortunately, we did not see the volatility within UK Government Gilts in this Budget Statement in comparison to the events following the update announcement by the government last Autumn, signalling that perhaps lessons have been learned.

Overall, we are pleased to have experienced a very positive month and we hope to see a further ‘Santa Rally’ in December.

If you have any questions regarding this update or if you would like to speak with an Independent Financial Adviser regarding your investments, please do not hesitate to get in touch on 01463 242242.

Author: Douglas Sims, Dip PFS, Independent Financial Adviser, Integrity365

Published: 20th Dec 2023