November: A Strong Month

Autumn leaves in park and wooden bench

Global equities were higher on the week, while the yield on the US 10-year Treasury note extended its decline to 4.26% from 4.39% just before American Thanksgiving. The price of a barrel of West Texas Intermediate crude oil rose about $2 from last week to $76.50 while volatility, as measured by the Cboe Volatility Index (VIX), held steady at 12.9.


It’s hard to believe we are already in December. Moderating inflation, decelerating economic growth and growing signs that the US economy may stick a soft landing helped send global equity prices higher in November, led by a 13% rise in Germany’s DAX. The S&P 500 rose over 9% on the month while the Bloomberg US aggregate bond index rose just over 4.5%, its best month since May 1985. Commodities were the only asset class to lose ground in November, led by a 6% decline in West Texas Intermediate crude. The combination of strong equity and fixed income performance lifted the Bloomberg 60/40 index by 7.5% last month.

Despite most central bankers pushing back against the notion that they will begin cutting rates if disinflation continues, investors continue to price in multiple cuts from the Fed. Futures markets are now fully pricing in a quarter-point Fed cut no later than 1 May and a total of five 0.25% cuts by January 2025.

From an equity return standpoint, the best performing major market year to date is the NASDAQ up 36.65 percent year to date followed by the NIKKI at 28.12 percent and the S&P 500, which is up 18.57 percent. The Canadian S&P TSX index is only up 5.51 percent year to date primarily because of its large weighting to energy stocks in a slowing growth environment.



Canada’s economy unexpectedly contracted at a 1.1% annualized rate in Q3, though Q2 data was revised sharply higher, more than offsetting the Q3 downturn. Canada added nearly 25,000 jobs in November, though the unemployment rate edged up 0.1% to 5.8% amid a rapid expansion in the labour force because of immigration.



At an event at Atlanta’s Spelman College on Friday, US Federal Reserve Chair Jerome Powell said that it is premature to speculate on when the Fed may ease policy, adding that the central bank is prepared to tighten more if it becomes appropriate and that policy is now well into restrictive territory. The Fed chair noted that the economy has not yet felt the full impact of past rate hikes. We believe that if inflation continues to decline over the next three to five months, that the Fed could start lowering its policy rate in the second quarter of 2024. Wednesday’s Beige Book showed that economic activity had slowed since the last report and that discretionary spending had declined as consumers showed more price sensitivity.



ECB President Christine Lagarde told European lawmakers that the euro zone economy is likely to remain weak for the rest of the year and that job growth may be losing momentum. The central bank may reassess its reinvestments of a pandemic-era asset purchase program earlier than the planned end of 2024. Eurozone M3 money growth contracted 1% year over year in October, the fourth straight monthly decline.

Inflation in the euro zone fell faster than expected in November, dipping to 2.4% year over year, down from 2.9% in October. The ECB is now seen cutting as early as March, with four cuts fully priced in during 2024. Anticipation of those rate cuts has helped propel the risk-on rally that has been underway for the past six weeks.



Last Monday, China’s central bank said it would fend off systemic risks to its economy and use forceful and targeted monetary policy to better support domestic demand. China’s manufacturing sector fell short of expectations in November as the government’s purchasing managers’ index slipped to 49.4 from 49.5.

India’s economy continued to grow strongly in the third quarter as gross domestic product rose 7.6% from a year earlier.

Argentina’s president elect, Javier Milei, appointed Luis Caputo as economy minister. Caputo served as finance minister in the country’s previous centre-right government and is seen as market friendly. Caputo visited Washington this past week for talks with the International Monetary Fund and the US Treasury.

OPEC+ agreed to one million barrels a day of new oil production cuts for 2024. The cartel also announced that Brazil will join the group in 2024.

Bank of Mexico Governor Victoria Rodríguez Ceja expects the central bank to begin debating rate cuts in early 2024.

Retail sales in Japan rose 4.2% year over year in October.






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