November General Markets Comments
“Don’t Stop” – Fleetwood Mac, 1977. A tribute to the late Christine McVie (1943-2022).
“Don’t stop” is what we all would like to say to markets after two very good months in a row, for the first time this year. For the record, the MSCI World has risen close to 14% since the end of September, the last time such a spectacular return happened on a two- month timeframe was in November and December 2020, right after Pfizer-BioNTech made public they had a vaccine against Covid.
The multifarious causes behind such a strong rebound are, first and foremost, the Fed and interest rates: inflation numbers published at the beginning of the month in the US seem to indicate that peak inflation might be behind us, which Jerome Powell more or less whispered in his November 30th speech. Long-term government bond yields consequently fell, offering some support to valuations. There are also some hopes among the investment community that China’s zero-Covid policies prove too much of a burden on the population for the government to maintain them without stymieing social calm; should China loosen its harsh sanitary measures, global growth would benefit from some relief on the supply-chain side and increased consumption in the country. Finally, as the Q3 earnings reports have all been published, markets now focus on the guidance provided by the corporate world, which, in general, was not that bad. Finally, the FTX debacle brings the opportunity to highlight some great Fleetwood Mac songs, as the “Little Lies” of Mr SBF did not provoke any “Landslide”, nor did it break “The Chain” in traditional markets; you can “Go Your Own Way”, Mr SBF.
The MSCI World added 6.8% last month, the S&P500 5.4% and the MSCI Europe 6.7%; but the star of the month was the MSCI Emerging Markets, which soared 14.6% (but is still down 21.1% in 2022); for once, Growth did not outperform Value in a month of falling interest rates, quite an unusual fact. Fixed income and credit markets also enjoyed the rally: the US and German10-year yields respectively fell 44 and 21 bps, and the Itraxx Crossover recouped almost half of its yearly losses with a 4.5% rise. Oil fell again (-6.9%), and Gold returned 8.3%, buoyed by falling real yields.
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