Market Update with Aled Phillips

December 2023

In today’s update, we’ll take a deep dive into the key market movements seen across the globe throughout November.

Global equities continue to perform robustly

November proved to be the strongest month of the year for global equities, with the MSCI AC World up by 9.1%, with a US-led rally which saw developed equities outperforming emerging markets. Emerging markets however did still enjoy a positive month overall, up 6%. Although China struggled to gain momentum, even in the face of stimulus efforts, the Nasdaq, Italian and Spanish stock markets broke into new yearly highs.

In sterling terms, year to date global equities have gained 12%, with North America being the key regional performer up nearly 16%, followed by Europe at 11%.  Growth outperformed value in all regions apart from the UK, whilst mid and small cap outperformed large caps.

Fixed income increases, commodities struggle

Bond markets also enjoyed a month of positive returns, with the Bloomberg Global Aggregate Bond Index up 5.5%. Similar to their rally in global equities, the US led the way again with the biggest monthly gain in aggregate bond indices since 1985. While corporate and high-yield bonds outperformed government and emerging market bonds, all still produced positive gains.

It was a differing story on the other hand for commodities, which fell by 3.7%, with Nickel falling 8.2%. This does not tell the whole story however, with gold and silver seeing returns of 2.6% and 10.6% respectively. In the currency markets meanwhile, the dollar had a difficult month – falling 3.7% against sterling.

Global inflation shows, interest rates peak

Most developed economies across the globe saw a fall in their Consumer Price Index (CPI) through November. This has been thanks to easing financial conditions in the wake of bond market performance, alongside growing optimism that interest rates have peaked, and recessionary fears are subsiding.

Energy prices continue to fall, with crude oil declining 6% in November – on top of the near 11% decrease in October. These price falls have contributed significantly to lower headline CPI figures, with US Core CPI data reaching its lowest level since September 2021. Indeed, US jobs data, showing a rise in claims to its highest level since November further suggest no immediate need for further central interest rate hikes.

Across Europe, a fall in inflation was apparent, with flash Euro area inflation at 2.4%. As a result, markets are now pricing in no more rate hikes, while cuts are expected eventually in 2024.

Differing fortunes in Q3 earnings and other markets

In what was an overall positive month for the US, Q3 earnings beat expectations, while European earnings fell below. Meanwhile, corporate buybacks have been higher than the seasonal average -also helping to support equity markets.

Tougher months were felt across the board in both Japan and China. In Japan, core CPI rose to 3.4% in November, leading to increasing expectations that the central bank (Bank of Japan) will take steps to normalise their interest rate policy.  Despite these shifting expectations that interest rate could rise, which has also helped trigger some yen appreciation, Japanese equities still remained resilient with export orientated stocks outperforming.

November also saw Chinese authorities continue to bolster its property sector, with a focus on bridging a $446 billion funding gap. Measures announced during the month included drafting a financing list for eligible property firms and planning substantial low-cost financing.

Continuing trend to tentative optimism for new year

Despite various challenges in markets across the globe then, November continued to show cautious signals for optimism ahead for 2024, with inflation beginning to trend downwards and interest rates stabilising.

As always, through next year, we’ll continue to keep you updated on market movements, and how they may affect you. It’s always important to remember that your financial plan accounts for movements such as these, but if you have any concerns or questions, please contact your adviser.

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Aled Phillips, Chartered Financial Planner & Commercial Director, was interviewed by Rhys Hicks.

The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.

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Market Update with Aled Phillips
Rhys Hicks 7 December 2023
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