In November, US shares outperformed following Donald Trump’s victory in the Presidential election, while emerging markets came under pressure amid worries over trade tariffs.
Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions, and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.
US
US shares enjoyed strong gains in November. Donald Trump emerged as the clear winner in the US Presidential election and equities were buoyed by expectations that his policy programme will lift growth, lower taxes and cut regulation. As well as Trump winning the Presidency, the Republican party also gained control of Congress which could make it easier for Trump to implement his campaign promises.
The Federal Reserve (Fed) lowered interest rates by 25 basis points (bps) to 4.50-4.75% at its November meeting. The policy-setting Federal Open Market Committee (FOMC) said that labour market conditions had generally eased and that inflation was still “somewhat elevated”.
The nonfarm payrolls report for October was distorted by the effects of hurricanes in southeastern states and by strike action. The report showed just 12,000 jobs were added in October. Data released later in the month showed that US annual inflation, as measured by the consumer price index, ticked up to 2.6% in October from 2.4% in September.
Top performing sectors included consumer discretionary and financials. Within consumer discretionary, some carmakers and retailers experienced strong gains. Within financials, banks drew support from expectations of a light touch approach to regulation under the incoming Trump administration. The weakest sectors in the month included healthcare and materials. US smaller companies performed strongly amid expectations that domestically exposed companies will benefit from Trump’s policies.
Eurozone
Eurozone shares, as measured by the MSCI EMU index, were virtually flat in November in euro terms. The information technology and communication services sectors were among the top gainers while materials and consumer staples suffered some of the steepest declines. Exporters were in focus amid concerns over potential tariffs from the US, as well as ongoing lacklustre demand from China, but the stronger dollar should prove beneficial.
Economic data from the eurozone continued to point to weakness. The flash HCOB composite purchasing managers index (PMI) fell to a 10-month low of 48.1, with both the services and manufacturing sectors showing contraction. PMI data is based on surveys of companies in the manufacturing and service sectors. A reading above 50 indicates growth while below 50 indicates contraction.
Euro area annual inflation is expected to be 2.3% in November 2024, up from 2.0% in October. However, the rise is thought unlikely to derail the European Central Bank’s (ECB) monetary policy easing, given economic weakness. The ECB is meeting on 12 December and is expected to lower interest rates.
The German coalition government collapsed after Chancellor Scholz sacked the finance minister. New elections will be held in February. Towards the end of the month, concerns began to build over France’s debt. French borrowing costs rose amid worries that the government would fail to obtain sufficient parliamentary support to pass a cost-cutting budget.
UK
Domestically focussed UK equities rose over the month, helping to recoup some of the losses suffered in the immediate wake of the October Budget. There was also a stabilisation in long-term government borrowing costs, which fell back marginally in November. These two factors added to the view there had been no major near-term surprise as a result of the overall policy thrust of the new Labour administration.
There was a cooling in the UK’s services sector, with S&P Global’s UK purchasing managers’ index (PMI) for services falling in November. While the PMI was still above the 50 level demarking expansion from contraction in activity, at 50.8 it was the lowest level since November 2023. At that time the UK was experiencing a shallow recession in response to the rapid increase in interest rates required to curb inflation.
The Bank of England (BoE) cut the Bank Rate by a further 25 basis points in November. Meanwhile, the Office for National Statistics confirmed that the unemployment rate was 4.3% for the three months to September (up slightly from 4% in the previous quarter). Wage inflation had remained strong at 4.8% (excluding bonuses), and comfortably ahead of inflation.
On the stock market, there were four new takeover deals announced in the final week of November amid a ramp-up in activity, which had slowed in the summer.
Japan
The Japanese equity market finished November with a slightly negative return of -0.5% for the TOPIX Total Return index in yen terms. The Nikkei 225 was down by -2.2%, indicating that the market’s correction concentrated on large cap stocks, in particular exporters.
The market continued to be influenced by news from the US, starting with Trump’s election win. Japanese equities initially rose along with US stocks. However, investor sentiment then began to be weighed down by concerns over the potential tariffs on the world, including Japan, as well as the trade restrictions against China. This led to underperformance of Japanese exporters including autos, technology, and basic materials.
The Japanese yen experienced higher volatility. After further depreciation upon Trump’s win, it appreciated against the US dollar toward the month end due to the expectation of further rate hikes by the Bank of Japan (BOJ), potentially in December. This also supported the performance of financial stocks including banks. Yen strength and solid economic development in domestic demand provided some confidence on domestic oriented companies such as retailers and services.
The majority of Japanese companies announced semi-annual results, which were mixed across sectors. Share buybacks continued to surge, and companies announcing additional share buybacks tended to enjoy favourable market reaction. Corporate governance reforms are in progress. Tokyo Stock Exchange (TSE) further disclosed the best case studies as well as examples where companies are not aligned with investors’ expectations. This may further support action by Japanese company management next year.
Emerging markets
Donald Trump’s win in the US presidential election acted as a headwind for emerging market (EM) equities. The MSCI EM index fell in US dollar terms, in contrast to the developed market indices. EM weakened in the face of a strengthening dollar and investor concerns about the impact of Trump’s intended tariffs, particularly on China.
Some of the smallest EM, such as the Philippines and Indonesia, registered the biggest losses in US dollar terms in the month with both recording foreign equity outflows in the month. Brazil underperformed, with investors disappointed by the government’s latest budget plan. Korea and Taiwan also declined amid foreign equity outflows. Both markets lagged the EM index amid investor concerns about the impact of global trade tensions on economic growth. Korea’s central bank unexpectedly cut interest rates by 25bps in the month on the back of these growth concerns.
Currency weakness weighed on the South African market, which underperformed the broader index, with the mining sector in particular under pressure given worries of lower demand from China. China lagged on the back of trade uncertainty, with investors fearful of the implications of higher tariffs on Chinese exports into the US.
While Mexico, Saudi Arabia and Malaysia all delivered a negative US dollar return, these markets outperformed the EM index. India was also ahead of the index given it is relatively less affected by global trade than some of its other Asia Pacific peers. Kuwait and the UAE gained in US dollar terms while the emerging European markets of the Czech Republic, Hungary, and Turkey were the top performers.
Asia (ex-Japan)
Asia ex-Japan equities declined in November amid investor fears over potential tariffs following Donald Trump’s re-election as US President. The Philippines, Indonesia, and South Korea were the worst-performing markets in the MSCI AC Asia ex-Japan Index, while Singapore was the only market to end the month in positive territory.
Mainland China, Hong Kong, and Taiwan also all experienced sharp declines in the month as the prospect of a second Trump presidency raised the risk of heightened tensions over trade and technology. As part of his election campaign, Donald Trump had pledged to impose tariffs of 60% or more on manufactured goods from China.
Singapore achieved robust gains in the month as overseas investors seeking exposure to the region switched from Mainland China and Hong Kong amidst the ongoing tensions between the US and China and attracted by Singapore’s political stability and relative neutrality.
Global bonds
Global bond markets ended the month on a positive note, despite volatility earlier in the month surrounding the US elections.
In the US, following the Fed’s rate cut of 50bps in September, market participants anticipated an additional 25bps reduction at the November meeting. This was forthcoming, taking the federal funds rate down to 4.50–4.75%, as expected.
However, Donald Trump’s victory in the Presidential elections raised expectations that the Fed might be forced to keep interest rates higher for longer, as his proposed policies are likely to bring inflationary pressures. Nevertheless, the initial effect on Treasury yields was short-lived, with markets reassessing the timeline and feasibility of implementing these policies. The 10-year Treasury yield ended the month 11bps lower, dropping to 4.17% (reminder: yields move inversely to prices).
In the eurozone, CPI inflation climbed to 2.3% year-on-year, up from 2.0% in October. Markets are anticipating the ECB will lower interest rates further, with one cut priced in for their December meeting. The backdrop is one of considerable uncertainty as the French government faced a no confidence vote over its proposed 2025 budget. The spread of French government bonds over German Bunds reached its widest level in 12 years as investors attached greater risk to French debt. Meanwhile, the rest of Europe saw 10-year government bond yields fall.
In the UK, gilts rallied over the month. Early in November, the BoE cut interest rates by 25 bps, to 4.75%. The Monetary Policy Committee (MPC) highlighted the difficulty of interpreting data and that a “gradual approach” to removing policy restraints remains appropriate. November also saw strong demand for gilt issuance as investor confidence in government debt contributed to the rally.
In Japan, the increased likelihood of a rate hike in December pushed the yen to a six-week high versus the dollar. In China, the People’s Bank of China injected RMB 900 billion into the banking system via its medium-term lending facility and left the lending rate unchanged at 2%, as expected.
Within corporate bonds, spreads tightened generally across the board. Significant rallies were seen in US high yield (HY) where spreads ground even tighter, to historical lows. The sector has been influenced by Trump’s expected pro-business policies and tax cuts aimed at stimulating growth. In contrast, European HY widened as spreads were impacted by the political turmoil in France and structural economic challenges in Germany.
Convertible bonds benefited from the equity market tailwind. The FTSE Global Focus index, hedged in US dollars, ended the month with a gain of 3.6%. The upside participation was 95%. The new issuance market for convertibles remains solid with volumes well above last year and well above historic averages.
Commodities
The S&P GSCI Index achieved a small gain in November. Agriculture and livestock were the best-performing components of the index, while industrial metals and precious metals were weaker. The energy component was little changed in November. Within agriculture, coffee and cocoa achieved robust price gains, while the price of wheat and sugar declined.
In energy, the price of natural gas rose strongly in the month. In precious metals, the price of both gold and silver fell in November. Within industrial metals, aluminium and copper prices fell, while lead, nickel and zinc achieved modest price gains.
Please note
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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