Reflecting on November 2019

What has happened?

Global equity markets, in aggregate, produced strong gains in November, with the MSCI All Country World Index rising 2.3%, driven by developed market stocks which, as measured by the MSCI World Index, rose 2.6%. Emerging Market stocks underperformed, with the MSCI Emerging Markets Index declining by 0.2% during the month.

 

On a country basis, US stock markets were once again amongst the strongest performers, with each of the S&P 500, Dow Jones Industrial Average and Nasdaq Composite indices hitting record highs. In the UK, the domestically-focused FTSE 250 index outperformed the more international FTSE 100, with the former rising by 4.0% during November. Meanwhile, stock markets in the eurozone, as measured by the MSCI Euro Index, rose by 2.5%.

 

Why?

The strength of stock markets during November represents the continuation of a rally that has been in place for most of 2019. Following a strong sell-off during in the final quarter of 2018, global equity markets have for the most part spent this year on the front foot, with the MSCI World Index, as at the end of November, higher by 21.7% year-to-date. Accommodative central bank policies have supported the move, including added stimulus from the European Central Bank and three interest rate cuts from the US Federal Reserve.

 

Meanwhile, last month, favourable political developments were the main factor behind the equity market strength. Progress was made between the US and China towards ending the ongoing trade dispute, while most election polls have Conservative leader Boris Johnson winning a majority in the 12th December vote, an outcome that removes the possibility of a Jeremy Corbyn-led government and significantly reduces the prospect of a no-deal Brexit.

 

What should you take away from it?

November serves as a reminder that, in the short-term, political developments continue to be one of the main drivers of the stock market, something that is unlikely to change as we head into 2020, with the US presidential election due to take place in November of next year.

 

However, our view remains that political events are difficult to predict, and that long-term equity market returns are more a product of corporate performance. We therefore prefer to try to identify high-quality companies with competitive moats that should be able to perform well against a variety of political and economic backdrops, and those that stand to benefit from exposure to structural growth opportunities.

 

Please contact your Investment Manager should you have any questions.