Commentary
U.S. and Pacific markets surge while others diverge
November market commentary
U.S. and Pacific markets surge while others diverge
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.
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