November 2023 Market Insights
Most developed markets bounced back strongly after their recent weakness. A slowing inflationary outlook and strong performances from growth equities boosted markets.
Written by Kevin Hua Co-founder & Chief Investment Officer
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What happened to the markets in November?
Most of developed markets bounced back strongly after their recent weakness. A slowing inflationary outlook and strong performances from growth equities boosted markets.
The best performer was the U.S. NASDAQ Index, which was up +10.70% and the German DAX Index, up +9.49% (local prices).
The largest negative performances were from Hong Kong’s Hang Seng Index and HSCEI Index, down -0.47% and -0.07% (local prices). The +4.06% rally by the AUD against the USD, dampened AUD returns for the Trends and indices.
Mixed picture for the economy but inflation is slowing
October inflation in the U.S. saw the which showed that the consumer price index fall to 3.2% year-on-year from 3.7% in September. Slowing inflation could indicate an end to interest rate hikes by the U.S. Federal Reserve although any rate cuts are unlikely in the near term.
This is because the economic data remains mixed. GDP growth in 3Q 2023 rose to 5.2% for the year, up from 4.9% but the manufacturing sector continues to be weak with a PMI of 46.7, showing contraction.
Inflation also slowing but interest rates are likely to remain elevated
Inflation in the U.K. saw a sharp decline to 4.6% year-on-year in October, below the 6.7% reading for September. However, the Office for National Statistics showed no growth in U.K. GDP in 3Q 2023. Such a mixed picture meant that while the U.K. market was positive for the month, it lagged other developed markets including those in Europe.
Annual inflation for November in the European Union was 2.4%, down from 2.9% in October, spurring more hopes that interest rates may have peaked. However, European Central Bank President Christine Lagarde warned that current interest rate levels were necessary to curb inflation and reduce it to its 2.0% target.
Other weak economic data does not also help the case for a reduction of rates in the near term with purchasing managers’ index for November at 47.1, still showing contraction.
Chinese economy underperforms while Japan ticks along
Chinese equities remain relatively weak due to weaker Chinese economic growth and concerns that Chinese government stimulus measures are proving ineffective in driving economic growth and fixing structural problems in the economy such as the real estate sector.
Economic figures in Japan are muted with 3Q 2023 GDP data showing weaker-than-expected domestic demand, consumption, and capital expenditure.
However, wage growth is strong and as are corporate earnings generally.