November was a fairly strong month for global risk assets, as developed market equities rose, emerging market equities were mixed, the US yield curve shifted slightly higher, the US dollar rose, credit spreads tightened, and the oil complex rallied. The US ISM manufacturing activity index rose slightly in October, but remained below 50, signaling continued contraction in the sector, while the non-manufacturing index rose to 54.7. In Congressional testimony, Fed Chairman Powell indicated that another interest rate cut was unlikely this year. US consumer prices rose 0.4% in October, while the US budget deficit for the 12 months ended in October exceeded $1 trillion for the first time since February 2013. Consumer inflation in China rose 3.8% in October from a year earlier, driven by soaring pork prices, though producer prices fell 1.6%, and the People’s Bank of China cut its lending benchmark rate. Japan’s GDP grew at a 0.2% annualized rate in the third quarter, the slowest pace in a year. The US jobs report showed that 128,000 jobs were added in October (the 109th consecutive month of job creation), the unemployment rate ticked higher to 3.6%, the labor force participation rate increased to 63.3%, average hourly earnings rose 3% from a year earlier, and the total labor force hit a record high of 164.4 million, of which 158.5 million were employed.
Developed market equities were mostly higher in November (see page 8), with the biggest gains in the S&P 500 (+3.6%), Canada (+3.5%), and Germany (+3%), and losses in Hong Kong (-1.6%). US small caps outperformed large caps, with the Russell 2000 up 4.1% and the Russell 1000 up 3.8% (see page 3). IT (+5.4%), Financials (+5%), and Health Care (+5%) were the best performing sectors in November; Utilities (-1.8%), Real Estate (-1.7%), and Consumer Staples (+1.3%) were the worst performing sectors (see page 2). Large cap growth (+4.4%) outperformed large cap value (+3.1%) in November (see page 3). Emerging market equities were mixed in November (see page 9), with the biggest gains in Argentina (+7.1%), Taiwan (+1.8%), and China (+1.7%), and losses in the Philippines (-3.2%), Indonesia (-2.4%), and Malaysia (-2.1%).
In currencies, the USD Index was higher (+0.9%) in November (see page 10). The Australian Dollar (-1.9%), Swiss Franc (-1.4%), and Japanese Yen (-1.3%) weakened the most against the USD, while the Swedish Krona (+0.8%), New Zealand Dollar (+0.1%) strengthened. Emerging market currencies were mostly weaker against the USD, with gains in the South African Rand (+3%) and Chinese Yuan (+0.3%), and the largest losses in the Brazilian Real (-5.1%), Mexican Peso (-1.6%), and Korean Won (-1%).
The US interest rate curve shifted higher in November (see page 12). 10 year rates closed the month at 1.78%, up from 1.69% at October month end. US investment grade and high yield spreads tightened in November (see page 13).
In commodities, the GSCI index was flat in November (see page 11), with gains in Energy (+1%), and losses in Precious Metals (-3.4%), Industrial Metals (-2.7%), Livestock (-2%), and Agriculture (-0.1%). Within individual commodities, Coffee (+13.4%), Cocoa (+7.4%), and Wheat (+5.7%) saw the biggest gains, while Natural Gas (-16.1%), Lean Hogs (-11%), and Silver (-6%) saw the biggest losses.
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