Written By Marcus Rayer
November was seen to be the second consecutive month providing gains for Balanced investors, due to the tailwind provided by the recent positive correlations between equities and bonds.
Deutsche Bank’s monitoring of 38 different assets revealed that only three were in negative territory during November. These three in question were Brazil’s equity and both versions of the oil price market. This is caused by market pricing in weaker short-term demand, as well as the potential effects of the EU’s intended price cap on Russian oil exports.
This is a stark contrast to the former months of the year and was largely down to the release of the US’s inflation data. The data suggested that peak annual inflation had been reached, resulting in an immediate and aggressive leap forward in the market based on this sentiment.
A further surge was also caused later in the month following the speech of Fed Chair, Jerome Powell, in which he suggested the possibility that the Fed would indeed be able to contemplate a slower pace of policy tightening.
Other notable events in November included the US mid-term elections. A split Congress provides little threat, or opportunity as far as investors are concerned, but the disappointing performance of the Republican Party appeared to lower the probability of a return to the White House for Donald Trump, which was seen as positive. The UK Autumn Statement was also reassuringly boring, if austere, and further bolstered confidence in the Sunak government, with cost-saving measures back-loaded into the next Parliament.
Attention has lately now turned to China and the protests against President Xi and his zero-Covid policy. There are no thoughts of a likely regime change, although a softening of restrictions seems to be happening, but sentiment towards China is close to rock bottom, both on a diplomatic and investment basis.
Despite the recent positives, there are likely further ‘bumps in the road’ to navigate, but now may be a time to re-asses your current investments and you may consider an increase of exposure to equity risk in portfolios, rather than to reduce at this stage in the market cycle. If you have any questions about your own investment strategy, please do not hesitate to get in touch with your Integrity365 adviser.
The media shall also seek to focus on the doom and gloom as always, especially as winter begins to bed in. We should instead look to focus on the fact that the markets will inevitably begin to rally before the economy bottoms out, thus further cementing the mantra of ‘keep calm and remain invested’.
If you have any questions arising from the above, please do not hesitate to get in touch with your Integrity365 adviser.
Source: Market Reflection November, Investec, Dec 2022
Written By Marcus Rayer
