After several weak months for markets, November saw a major rally as hopes for a soft landing and a dovish central bank pivot gathered pace. In fact, it was the best month for a global Balanced portfolio of equities and bonds since the positive Covid-19 vaccine news in November 2020, and the 7th best month for the S&P 500 in the last 100 years, up an impressive 8.9%. This was the key driver for the MSCI ACWI which gained 9.1% and is now up 14.7% YTD. European indices have been weaker this year, with the STOXX 600 up only +8.6%, and yet worse is the 0% flatline performance from the FTSE 100, a remarkably disappointing result for UK investors in 2023 as we approach year end.

Equally astonishing is the strong performance of Japanese stocks which are up 28.3% this year on the back of rising inflation, with core CPI ex food and energy prices the highest since the 80s and 90s, and a Bank of Japan that appears marginally more willing to let yields rise more meaningfully. The local performance of Russian stocks (MICEX index) at +47% is also instructive and, even when adjusting for the weaker Ruble, scores near the top of global performance tables (the market remains inaccessible to foreigners).

On track for a record fourth year in a row of negative returns would be Hong Kong’s Hang Seng index, currently down almost 14% for the year and also down in November. The CSI 300 was also down last month and has been down for two years now. China’s economy is still in a firm downtrend and, so far, government measures to resuscitate the ailing property markets and inject confidence into the consumer at home do not appear to be gaining any traction, nor is it abroad for foreign investors. Headline valuations look attractive, but investors have given up on the country’s market for the obvious political risks as well as for a range of other reasons. The region continues to be on our watch list; however, it seems too early to get involved as the downtrend is entrenched and deep property market slumps can have lasting effects on sentiment and ultimately aggregate demand.

November also saw notably solid returns for fixed-income indices, driven by a combination of lower core government yields, tighter credit spreads and attractive levels of underlying yield/income/carry. Commodity indices were dragged down by energy markets as expectations for sluggish global demand in 2024 were priced into markets, WTI oil declined -6.2% during the month, whereas natural gas prices were down a much sharper -21.6%. Overall however, it was an incredibly solid month across the board, with 33 out of the 38 non-currency assets in the Deutsche Bank survey of assets posting positive returns.