Markets In Focus: November market snapshot

Positive expectations of an end to US interest rate hikes made November the best month of 2023 for global equities. Benchmark indices in the US and SA delivered returns of more than 8% for the month, and almost all other major equity markets, other than Hong Kong, registered positive gains. The Hang Seng has been weighed down by China’s over-indebted property companies.

Among other key assets, the US benchmark 10-year government bond yield also strengthened, to 4.21%. The gold price broke through new records in early December, touching $2 100/oz, as investors anticipate that the dollar will weaken when the US Federal Reserve cuts interest rates.

Behind the rally, which contrasts with several preceding months of negative market sentiment, lies positive trends in US economic data, indicating that the Fed’s strict interest rate policy may have been successful in taming inflation without triggering a recession. Inflation in US personal consumption expenditure fell to 3.5% in October from 3.7% in November.

Inflation in the EU region fell to 2.4% in November from 2.9% in October and economic data continue to show weak growth, particularly in the manufacturing sector. However, both in the EU and the UK, central banks have reiterated that the fight against inflation is continuing, and interest rate cuts are not yet on the horizon. Data from China is mixed but reflects an economy that is struggling to gain traction overall.

In SA, CPI rose to 5.9% for the month, largely because of higher food, housing, utilities and transport costs, but core inflation was within the South African Reserve Bank’s target band, at 4.4%. The SARB kept the repo rate unchanged at 8.25% but emphasised upside risks to inflation.

Geopolitical disasters in Eastern Europe and the Middle East which held the potential for supply-side shocks, particularly for energy, have continued to simmer. However, there has been little sustained effect on oil prices. Brent crude oil has fallen 3.6% in the year to date, which has helped to ease global inflation concerns.

South African investors would have earned the most from an investment in the MSCI World Index, which has delivered 25.96% (in rands) over one year and 17.06% over five years, at least partly due to the depreciation in the rand/dollar rate. The JSE All-Share Index has delivered 4.69% over one year and 12.37% over five years, while the All-Bond Index has delivered 8.76% and 8.06% over the same periods. The JSE’s property sector has been the weakest performer, with the SAPY returning 1.35% over one year and  -1.84% over five years.

Table 1: Total returns to 30 November 2023

Source: Morningstar | Total returns annualised to 30 November 2023