Developed Markets (DMs) had their best month since January 1975 (MSCI World +12.8% MoM), putting global equity markets well on track to end the year up by double digits (MSCI World +11.2% YTD) – a remarkable feat given the c. 34% sell-off experienced during February and March. November started with a highly contested US Presidential Election, which initially appeared to have incumbent, Donald Trump, defying the odds to win a second presidential term. With results too close to call for the better part of a week, Democratic challenger Joe Biden slowly clawed his way back into contention and, though results in some states are still being challenged, appears to have comfortably won the presidency. The race for the Senate, which is critical in determining the trajectory of US fiscal stimulus and tax policy, still hangs in the balance with the two Georgia Senate seats being pushed to a run-off, which will happen in early January 2021. The outcome of those run-offs will determine control of the Senate, with Republicans slight favourites to win at least one of those seats and maintain control of the Senate. The US election drama was swiftly relegated to second place with Pfizer’s announcement on 9 November that it had achieved astounding success with its COVID-19 vaccine candidate. Moderna and AstraZeneca followed in swift succession with successful vaccine trial results of their own to entrench the positive sentiment. Markets rallied hard on the news, looking through the fact that new COVID-19 infections were reaching record levels in the US and many parts of Europe and instead focusing on the prospects of normalised economic activity as early as 1H21 as mass vaccination rolls out.
The prospect of a vaccine-induced return to some form of normality saw a huge rally in some recently out-of-favour assets. European stocks were amongst the best performers in November (Eurostoxx 50 +18% MoM), as were some emerging markets ([EMs] MSCI Russia +20.8% MoM, Brazilian Bovespa +15.9% MoM). However, despite these large moves, all those markets remain in negative territory YTD. At a sector level, YTD laggards, financials and energy, were amongst the best performers in November (S&P 500 Financial +16.9% MoM, S&P 500 Energy +28% MoM) but in spite of the rotation, these two sectors (along with S&P 500 REITs) remain the only S&P 500 sectors still down YTD. Energy stocks were the beneficiaries of a 27% MoM bounce in the price of Brent crude oil.
Despite the rotation towards previously out-of-favour cyclicals, the tech-heavy Nasdaq 100 Index delivered an 11% MoM return, leaving it 42% higher YTD. While some EMs fared extremely well in the month, EMs broadly underperformed DMs in November (MSCI EM +9.2% MoM), with Chinese stocks the main laggards. China’s relatively lacklustre performance (Shanghai Composite +5.2% MoM) came off the back of some proposed regulations which scuppered plans for the blockbuster listing of Chinese fintech giant, Ant Financial and introduced the prospect of anti-trust regulations hampering future growth of China’s mega-tech companies.
Despite the strong risk appetite in November, interest rates were mostly stagnant, with US 10-year government bond yields ending the month unchanged at 0.85%. However, the US dollar was weaker against most currencies, particularly EM currencies (Brazilian real +7.7% MoM, Mexican peso +5% MoM).