November 2023 Global Markets Update | Savvy
- Investors were greeted with positive returns across almost all global equity and fixed income markets.
- Inflation continued to decline and the Fed continued its “paused” stance towards rates.
- Non-Energy real assets continued to rally (yes that includes BitCoin as well)
Traditionally November has been the best month of the year for US equity markets1, and this November was no exception. Major US indices from Small Caps, to Tech to Large Caps rallied significantly ranging from 8% for the S&P 500 to 9.05% for the Nasdaq.
These returns are welcome news to investors who suffered through significant losses during September and November with the Russell 2000 leading the way down during those two months with losses in just North of 13%.
Investors may have more to look forward to, as the two month period from November to the end of December has, since 1950, been the strongest two month period in the markets2.
November’s good returns have also pulled all major US indices into the green for the year. As mentioned above, September and October were particularly dour for Small Caps which struggled as rates rocketed up during the early part of the year3.
The Nasdaq continues to pace equity returns as many tech meg-caps have rallied significantly during the year to drive a remarkable recovery amongst a sector that was pummeled in 2022.
From a sector perspective, the specter of a Fed pause and new hopes that rates will begin to decline in the spring of 20244 buoyed the Financial and Real Estate sectors return during november. Energy once again lagged, continuing a multi month downtrend trend in the sector.
For the year, risk on sectors and those sectors that lagged most in 2022 continue to lead the way forward. Tech and Communications are now both up upwards of 45% for the year; and no wonder with the likes of Meta, Nvidia and Tesla all rallying over 90% year to date.
On the factor side, in line with the robust performance of Financial stocks and Real Estate sector stocks, Value led all factors during November, closely followed by both Momentum and the Dividend factor.
These results do little to change the year to date sector performance in US markets where Growth and Quality factors have dramatically outperformed Low Volatility and the Dividend factor.
Again, these results are largely explainable by both the sector returns shown above and the star stocks that have driven market performance for the year. The chart below shows the primary contributors and detractors to the Russell 1000 return for the year. As you can see, higher growth, more volatile stocks have been almost the sole driver of Large Cap returns for the year.
Global markets rallied in line with US equity markets. Chinese markets were the loan laggard during November driven by continued poor performance in the Chinese property sector5.
Despite continued poor performance out of China, 2023 continues to be a positive year in global markets, with almost all markets, especially Brazil, posting gains for the year. For the year, most developed economies are tracking in line with US equity markets (not the Nasdaq of course).
Fixed Income Markets
Global bond yields fell across the board during November as multiple central banks indicated they were pausing any rate increases6 along with inflation growth that finally seems to have moderated.
It seems fixed income markets have reached the tipping point where a rate cut in early 20247 is now much more likely than another rate hike, portending the possibility of good price returns from bonds with more exposure to duration.
This news sent performance upward across bonds across the maturity spectrum as well as across international and emerging fixed income markets. The recovery in long term bonds is especially notable, as the 20+ year Treasury ETF rose over 7.5% for the month.
Though year to date performance for long term bonds remains negative as of the end of November, if the chance of rate cuts in early 2024 becomes more likely, long term bonds could creep into positive territory before year end.
BitCoin and precious metals continued their multi-month rally with BitCoin now posting over 100% gains for the year, and more than 9% for November.
These returns also continued the reversal from 2022 where oil outperformed almost everything, with investors in oil now seeing essentially flat returns for the year, while most other asset classes are showing quality returns for the year.
May December be a merry month. Happy holidays all and see you in 2024.
The information contained herein has been obtained from sources that are believed to be reliable. However, Savvy does not independently verify the accuracy of this information and makes no representations as to its accuracy or completeness.