Investment update for November 2015
US Fed rate rise speculation continues
Despite a mid-month sell off in many developed markets, November was a fairly steady month for most global markets, in the wake of a significant spike in volatility in August and September. The Australian market began the month well as investor sentiment improved and the Reserve Bank of Australia (RBA) indicated some possibility of a further rate cut. This was short lived as US-led weakness eroded early gains. The sell-off was also driven by falling commodity prices.
The timing of an interest rate rise by the US Federal Reserve remained a talking point. Geo-political tensions—such as the Paris terror attacks—reduced consumer confidence, but continuing employment and income growth increased the likelihood of a rate rise in December. US markets saw minor improvements on October’s gains with the S&P500 returning 0.2% for the month.
European markets performed reasonably well in November, compounding on strong growth in October. The terror attacks in Paris and Mali and the shooting down of a Russian jet had minimal impact on European markets. Continued speculation that the European Central Bank would enhance its existing quantitative easing program was also a positive for European financial markets.
The Chinese Shanghai Composite Index rose 1.9% despite falling approximately 5% in the last days of the period. This volatility was enough to drive most Asian markets into negative territory. The Nikkei 225 index was a notable exception, which rose 3.5% despite the release of slightly disappointing Japan GDP figures.
The MSCI World ex-Australia Index (hedged into AUD) rose by 0.9% over the month. The Australian Dollar appreciated against most currencies in November. Across developed markets, Belgium (9.8%), Denmark (7.9) and Ireland (7.6%) outperformed while Greece (-21.8%) and Singapore (-4.8%) were the weakest performing countries in local currency terms. The MSCI Emerging Markets Index (-5.4%) underperformed developed markets.
Locally, the S&P/ASX300 Accumulation Index posted a slightly negative monthly performance of -0.7%, after strong growth in October. Small Caps stocks were flat (0.0%), outperforming the broader market while Large Caps stocks (-0.8%) underperformed. Health Care (5.2%) and IT (4.5%) stocks outperformed, while Materials (-12.2%) was the standout worst performing sector.
Most currencies fell against the US dollar, with two notable exceptions. The Australian dollar (up 1.3%) curiously rallied in spite of falling iron ore prices and a strong US dollar, and likely got a boost from the RBA’s decision to hold rates. The Malaysian ringgit (up 1.0%) rallied alongside Brent prices and although the rally lost momentum mid-month, the currency managed to hold onto some gains.
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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