Sabco® Investment's Monthly Market Report - November, 2022

Sabco® Investment's Monthly Market Report - November, 2022

In November, the Federal Reserve revised its expectations for future rate hikes in response to better-than-expected inflation data in the U.S. This led to a decline in long-term interest rates, significant gains in equity markets, and a depreciation of the dollar.

The MSCI AC World Index increased by 3.3% in euro terms in November, but there were notable regional differences. Emerging market equities outperformed with a 9.9% increase in euro terms, followed by Eurozone equities (+8.3%). In contrast, U.S. equities underperformed other regions, with only a 0.9% increase in euro terms. Cyclical sectors like materials, industrials, financials, and consumer electronics performed well in the U.S. market, while the energy and healthcare sectors struggled. Among major U.S. companies, Meta saw a 26% rise, but Amazon and Apple ended the month lower. Semiconductors had a significant increase of 18%. U.S.-listed Chinese stocks performed strongly, although many still experienced losses for the year. Tesla (-14.4%) and Disney (-8.1%) weighed on the U.S. market.

The Federal Reserve remained a key focus for the market in November. While an expected 75 basis points rate hike took place at the November 2 meeting, market expectations shifted toward the idea of the Fed slowing its pace of increases in December. Economic data indicated a potential slowdown in rate hikes, with lower-than-expected inflation in October and some relief in price components of regional manufacturing indices. Job growth also slowed, although retail sales showed an increase in October. Developments in China also captured market attention, with concerns over the country's strict COVID measures and protests. However, investors maintained optimism about the government's plans to support the housing sector.

During the third-quarter earnings season, S&P 500 companies reported 2.4% earnings growth and 10.9% average sales growth, slightly below expectations. Despite comments on the economic environment and inflationary pressures, corporate results indicated healthy consumer spending.

Government bonds experienced significant movements, with U.S. 30-year yields initially rising above 4.30% before falling below 3.70% by the end of November. Credit spreads narrowed, and eurozone government bonds rose 2.3% in November. Corporate bonds also performed well, partly due to the tightening of credit spreads.

The Federal Reserve raised its key interest rate by 0.75% in early November, but some members suggested a potential slowdown in rate hikes at the December meeting. The European Central Bank (ECB) had mixed opinions on the rate increase, with some members favoring a 0.75% increase and others preferring a 0.50% increase.

The dollar depreciated for the second consecutive month, with the DXY index experiencing its weakest performance since September 2010, losing 5.1%. Against the euro, the dollar depreciated by 5%, and it also weakened significantly against the yen (-7%).

Gold prices increased by 7.3% in dollar terms, marking the best month since May 2021, driven by lower long-term interest rates and a declining dollar. Conversely, oil prices fell for the fifth time in the past six months, with WTI losing 6.9% (in dollar terms) due to concerns about Chinese demand. However, industrial metals rebounded by 14% in November following the Chinese government's support for the real estate sector.