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Whilst the focus is predominantly on events from November, there may be reference to events and results from earlier months in the year which may be relevant or have impacted the November performance overall.
Global stock markets rallied in November as it appeared that inflation may be starting to slow in some areas. Stock markets in China and across Asia reacted positively to the Chinese government’s announcement of a relaxation of Covid restrictions 1.
US
The US economy appears to be resilient in the face of the cost of living crisis. In November, it was announced that retail sales rose by 1.3% month-on-month in October, as households continued to buy cars and a range of other ‘goods’ 2.
The good news comes alongside findings that inflation is starting to slow, which means the US might be able to avoid a recession in 2023 or at the very least, only experience a minor downturn 2.
The Federal Reserve, however, is expected to continue their tough stance on interest rate hikes since inflation still remains high – although rate hikes may be slightly less aggressive moving forward than they have been recently 3.
A slump in activity in the housing market caused concerns, as affordability of housing dropped to its lowest level since 2006 1.
The markets rallied at the suggestion that inflation is beginning to slow. The S&P 500 logged a 5.4% gain for the month 4. The Dow Jones Industrial Average and Russell 2000 also ended the month on a gain, logging increases of 5.7% and 2.2%, respectively 4.
UK
The Office for National Statistics announced that inflation in the UK hit 11.1% in October, attributing the rise to soaring energy prices and labour shortages caused by the Covid-19 pandemic 5.
Economists are now predicting lower peak inflation than they were in August, suggesting that the Bank of England may only raise the base rate by 0.5% at their December meeting rather than 0.75% as they did in November 5.
The Office for Budget Responsibility announced that the UK is officially in a recession that will likely last more than a year, and it expects a 7% drop in the average household income over the next two years 6. This equates to the largest drop in living standards since records began in the 1950s 7.
New chancellor Jeremy Hunt announced some support measures in his Autumn Statement, as well as reductions or freezes to tax thresholds that will generate £55 billion for the Treasury through spending cuts and taxes 7. This could reduce the impact of the recession 7.
The UK stock market continued to rally in November. The FTSE 250 closed the month with a gain of 7.1% and the FTSE 100 gained almost 6.7% 8.
Europe
Even though the cost-of-living crisis is continuing to affect many European nations, headline inflation eased slightly at an annual 10% mostly thanks to a slowdown in the growth of energy prices 9.
Energy and food prices continue to be the biggest contributors to inflation, although the rate of growth in prices has slowed slightly this month 9.
Thanks to government efforts to fill gas tanks ahead of the winter, though, the risk of running out of fuel is now greatly reduced 1.
The bigger than expected drop in inflation in November could mean that the European Central Bank’s interest rate hikes will begin to slow in the near future 10.
Similarly, to the US and UK, Eurozone stocks closed the month with a gain. The pan-European Stoxx 600 logged a gain of 6.1% across November 10.
Asia
China’s manufacturing activity unexpectedly shrunk in November, according to data from the Purchasing Managers' Index, a key indicator of economic activity 11. The survey pointed to extremely strict lockdowns and restrictions in China as the cause of the slowdown 11. The International Monetary Fund had already issued a warning in October that future growth could be negatively affected if changes are not implemented soon 12.
Following widespread protests in Shanghai and Urumqi, it was reported earlier this month that some Covid restrictions have now been eased 13 and the government has committed to vaccinating more older people in an effort to reduce the infection rate 14.
Asian equity markets responded positively to the developments in China’s Covid policy, and Asian stocks rallied 18.8% across the month 1.
What this means for you
After a few difficult months on the global stock markets, November began to see an increase in returns despite ongoing pressure on households from rising prices of energy and food.
It seems as though there may still be some difficult months ahead but, during November at least, we started to see a reversal of the factors that have driven up inflation over the past year.
It’s an important reminder that you should not attempt to time the markets based on political or economic events. Even experienced fund managers can’t always predict when markets will rise or fall, so it’s doubly hard for the average investor.
Creating a plan and sticking to it for the long term is often the best course of action. Markets will always be volatile, but by following one of the key pillars of Succession’s investment philosophy – a long-term view – you can give yourself the best chance of riding out uncertainty.
Sources:
1 1.12.22 Monthly Market Review J.P. Morgan
2 16.11.22 U.S. retail sales rise solidly; fourth-quarter GDP estimates raised Reuters
3 5.12.22 Monthly markets review - November 2022 Schroders
4 1.12.22 S&P 500 gains 5.4% in November S&P Global
5 30.11.22 UK public's inflation expectations ease in Nov - Citi/YouGov Reuters
6 17.11.22 Worst fall in UK living standards since records began, says OBR The Guardian
7 18.11.22 Autumn statement: Millions to pay more in tax as chancellor cuts top-rate threshold and lays out plan to plug 'black hole' Sky News
8 1.12.22 Best shares in November and outlook for UK stock market in December Interactive investor
9 30.11.22 Euro zone inflation rate eases slightly to 10% as surge in energy prices slows CNBC
10 30.11.22 European markets close higher after euro zone inflation data; Stoxx 600 up 6% for the month CNBC
11 30.11.22 China Covid: Factory activity shrinks more than expected BBC
12 30.10.22 How Xi sacrificed China’s future in pursuit of total power The Telegraph
13 4.12.22 Chinese cities ease Covid curbs in wake of protests The Guardian
14 30.11.22 China to ramp up Covid vaccinations for its elderly Reuters
Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The content of this guide was accurate at the time of writing.
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