Market commentary
November market commentary
Global stock markets finished with mixed performance in November. A rally in the U.S. in response to former President Donald Trump’s victory in the presidential election, as well as strong performance in the Pacific ex Japan region, was partially offset by downturns in Europe and emerging markets. All three major U.S. equity market indexes established record highs during the month. Additionally, the Dow Jones Industrial Average, the broad-market S&P 500 Index, and the small-cap Russell 2000 Index posted their largest monthly gains of 2024. Developed markets gained ground and significantly outperformed their emerging-market counterparts, which ended the month in negative territory. North America was the top performer among developed markets in November, lifted by upturns in the U.S. and Canada. The Pacific ex Japan region also garnered a positive return due mainly to strength in Singapore and New Zealand. Conversely, Europe was the weakest performer due to market downturns in Ireland and Portugal. The significant underperformance of the Nordic countries resulted from weakness in Finland and Denmark. Jordan + Egypt + Morocco led the emerging markets in November. In contrast to its developed-market counterpart, Emerging Europe ended the month in positive territory, bolstered by strength in Hungary and Czech Republic. The worst-performing emerging markets for the month included Latin America and the Association of Southeast Asian Nations (ASEAN), hampered mainly by market declines in Brazil and the Philippines, respectively.1
Global fixed-income assets, as measured by the Bloomberg Global Aggregate Bond Index, returned 0.3% in November. Mortgage-backed securities (MBS) were the strongest performers within the U.S. fixed-income market, followed by investment-grade corporate bonds, high-yield bonds, and U.S. Treasurys. Treasury yields moved modestly lower over the month, with the exception of the 1-month and 1-year segments of the curve. Yields on 2-, 3-, 5- and 10-year Treasury notes declined by corresponding margins of 0.03%, 0.02%, 0.10%, and 0.10%, ending the month at 4.13%, 4.10%, 4.05%, and 4.18%, respectively.2 The spread between 10- and 2-year notes narrowed from +0.12% to +0.05% over the month, and the yield curve remained positively sloped (longer-term yields exceeded shorter-term yields). A positively sloped yield curve generally indicates that the economy is expected to grow in the future.
Global commodity prices, as represented by the Bloomberg Commodity Total Return Index, gained 0.4% in November. The West Texas Intermediate (WTI) and Brent crude oil prices declined 1.8% and 1.3%, respectively, over the month amid easing worries about the risk of supply constraints caused by the Israel-Hezbollah conflict. The gold spot price was down 2.5%, pressured by Donald Trump’s election victory, which sparked a rally in the U.S. dollar. (The gold price typically moves inversely to the greenback.) The 24.2% surge in the New York Mercantile Exchange (NYMEX) natural gas price in November was attributable to forecasts of below-average temperatures in much of the U.S. in December, which could lead to increased demand. Wheat prices were down 3.9%, hampered by falling prices for exports from Argentina and the Black Sea region, as well as U.S. dollar strength. (The wheat price typically moves inversely to the U.S, dollar.)
Donald Trump, a Republican, defeated his Democratic Party opponent, Vice President Kamala Harris, winning majorities in both the Electoral College and the popular vote. Trump is the first U.S. president since Grover Cleveland—who served from 1885 to 1889, and 1893 to 1897—to be elected to two non-consecutive terms. The president-elect ran on a populist platform focused on illegal immigration, crime, tariffs, and tax cuts. The election results initially sparked a week-long rally in the U.S. equity market as investors expressed optimism that the new administration’s proposed tax cuts and loosening of regulations will boost economic growth. The upward momentum subsequently slowed in response to stickier-than-expected inflation data and less dovish comments from Federal Reserve (Fed) Chair Jerome Powell.
In prepared remarks delivered in Dallas, Texas, in mid-November, Powell stated that, given signs of continued economic strength, the central bank does not see an urgent need to accelerate the pace of interest-rate cuts. “The recent performance of our economy has been remarkably good, by far the best of any major economy in the world,” he said. “The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
On the geopolitical front, Ukraine launched U.S.-made long-range missiles into Russia for the first time on November 19. This action prompted Russian President Vladimir Putin to approve amendments to the nation’s nuclear doctrine, expanding the conditions under which Russia may use nuclear weapons. In the Middle East, Israel and Hezbollah, an Iran-backed Shia militia based in Lebanon, reached agreement on a ceasefire in late November. Under the terms of the 60- day truce, Israel will gradually withdraw its troops from Lebanon, and Hezbollah’s forces will move away from Lebanon’s border with Israel.
1 All equity market performance statements are based on the MSCI ACWI Index.
2 According to the U.S. Department of the Treasury. As of 29 November 2024.
The federal-funds rate is the interest rate charged to lending institutions on unsecured overnight loans. It is set by the U.S. Federal Reserve’s Federal Open Market Committee. The rate is increased when the Federal Reserve wants to discourage borrowing and slow the economy and decreased when the Federal Reserve wants to spur economic growth.
Yield is the income returned on an investment, such as the interest received from holding a security. The yield is usually expressed as an annual percentage rate based on the investment’s cost, current market value, or face value.
Yield curve represents differences in yields across a range of maturities of bonds of the same issuer or credit rating (are (which is used to assess the risk of default of companies or countries). A steeper yield curve represents a greater difference between the yields. A flatter curve indicates that short- and long-term yields are closer together.
An inverted yield curve occurs when short-term yields exceed long-term yields. While an inverted yield curve historically has predicted economic recessions, it is an indicator—not a forecast.
Monetary policy refers to decisions by central banks to influence the amount of money and credit in the economy by managing the level of benchmark interest rates and the purchase or sale of securities. Central banks typically make policy decisions based on their mandates to target specific levels or ranges for inflation and employment.
All indexes are quoted in gross performance unless otherwise indicated.
The MSCI ACWI Index is a market capitalization-weighted index that tracks the performance of over 2,000 companies, and is representative of the market structure of 48 developed and emerging-market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars.
The Dow Jones Industrial Average is a price-weighted average of 30 large, publicly traded stocks listed on the New York Stock Exchange and Nasdaq.
The S&P 500 Index is a market-weighted index that tracks the performance of the 500 largest publicly traded U.S. companies and is considered representative of the broad U.S. stock market.
The Russell 2000 Index tracks the performance of the small-cap segment of the U S. equity market. The index is a subset of the Russell 3000 Index, which comprises the 3,000 largest U.S. companies, and includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership.
The Bloomberg Global Aggregate Bond Index is a market capitalization-weighted index that tracks the performance of investment-grade (rated BBB- or higher by S&P Global Ratings/Fitch Ratings or Baa3 or higher by Moody’s Investors Service) fixed-income securities denominated in 13 currencies. The index reflects reinvestment of all distributions and changes in market prices.
The S&P US Mortgage Backed Securities Index tracks the performance of U.S. dollar-denominated, fixed-rate and adjustable-rate/ hybrid mortgage pass-through securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA) and Freddie Mac (FHLMC).
The ICE BofA U.S. Corporate Index includes publicly issued, fixed-rate, nonconvertible investment-grade (rated BBB- or higher by S&P Global Ratings and Fitch Ratings or Baa3 or higher by Moody’s Investors Service) dollar-denominated, U.S. Securities and Exchange (SEC)-registered corporate debt having at least one year to maturity.
The ICE BofA U.S. High Yield Constrained Index is a market value-weighted index of all domestic and Yankee high-yield bonds, including deferred interest bonds and payment-in-kind securities, with maturities of one year or more and a credit rating of BB+ or lower by S&P Global Ratings and Fitch Ratings or Ba1 or lower by Moody’s Investors Service, but are not in default.
The ICE BofA U.S. Treasury Index tracks the performance of the direct sovereign debt of the U. S. government.
The Bloomberg Commodity Total Return Index comprises futures contracts and tracks the performance of a fully collateralized investment in the index. This combines the returns of the index with the returns on cash collateral invested in 13-week (three-month) U.S. Treasury bills.
Consumer-price indexes measure changes in the price level of a weighted-average market basket of consumer goods and services purchased by households. A consumer price index is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically
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