November Market Commentary

November was a positive month for both stocks and bonds despite global manufacturing falling into contraction territory, zero COVID policy in China causing civil unrest, and global central banks continuing their aggressive tightening policy.   However, investors looked beyond the headlines and towards the potential slowing of interest rate hikes and conclusion of the U.S. midterm elections (gridlock is back!) 

The main driver for returns in November was evidence that inflation may be easing and comments from the Federal Reserve about slowing the pace of future interest rate hikes.  In a nod to diversified portfolios, international stocks both in developed and emerging markets outperformed US stocks.  Developed international equities (MSCI EAFE) outperformed the U.S. market (S&P 500) by the widest margin since 2009.  International stocks benefitted from a fall in the US dollar which weakened the most since September 2010.  

Fixed-income investments posted gains for the first time in four months as yields came down on the expectation of slower rate hikes. 

Despite the positive month in investment markets, the economic outlook is uncertain which should mean further volatility over the next few months.   Most economic data points to a recession in the US sometime early next year; however, the labor market remains resilient as the economy added more jobs than expected in November and average hourly earnings also exceeded expectations.  The positive jobs data has caused some market pundits to believe that we could slow growth enough to bring inflation down but not to the point of a recession.