Returns varied across different stock markets in November, with the US S&P 500 Index down 0.6%*, while markets in some other developed countries achieved modest gains.
Meanwhile, emerging market stocks slipped 3.2% over the month, reflecting geopolitical uncertainty, weaker economic data and investors selling to take profits.
Bond markets were relatively stable, with yields** falling late in the month as expectations of further rate cuts increased. US and UK government bonds also benefited from the downward trend in inflation. The gold price rose during the month as investors continued to turn to the precious metal as a ‘safe haven’ asset intended to act as a hedge against macroeconomic risks.
As an investment team, we continue to believe we will see reasonable returns from major asset classes over the coming months. However, we will maintain a sharp focus on geopolitical risks and the potential for unforeseen events to have an impact on stock markets.
UK
The FTSE 100 had a positive month, with a gain of 0.4%. Chancellor Rachel Reeves delivered her much-anticipated Budget. Measures included extending the freeze on Income Tax thresholds, capping National Insurance relief on ‘salary sacrifice’ pension contributions and introducing a property tax on homes valued over £2 million. UK stocks reacted positively, rising on Budget day. The Chancellor has significantly increased the safety buffer (or ‘headroom’) in the public finances. However, when many of the tax rises come into effect in 2028/2029 and beyond, they could weigh on future economic growth.
Europe
European stock markets ended November positively, with the MSCI Europe (excluding UK) Index up 0.6%. However, there was volatility earlier in the month, with fears of a ‘bubble’ in artificial intelligence (AI) related stocks initially having an impact on investor sentiment. Discussions about a Ukraine-Russia peace deal also affected certain sectors, notably defence stocks, which have had a strong run recently because of increased geopolitical risks. Eurozone inflation unexpectedly edged up to 2.2% in November. This was largely driven by services sector inflation, which reached 3.5%, its highest level since April.
US
The federal government shutdown dragged on until mid-November, resulting in an economic data blackout for investors. The S&P 500 fell slightly in sterling terms during the month, as investors sought to lock in their profits by selling stocks, particularly those of large technology companies. Overall, company earnings season was positive, with the majority of companies beating expectations. Meanwhile, expectations of another US interest rate cut in December have increased significantly.
Japan
After a strong run in October, Japanese shares slipped back a little in November, with the MSCI Japan Index down -1.5%. This pullback reflected investors selling to take their profits after Japanese stocks reached record highs. In addition, investors were concerned about global economic growth.
Political optimism lingered after the election of Sanae Takaichi as prime minister in October. However, investors’ hopes of government measures to stimulate the economy were tempered by concerns about the risks associated with implementing such policies.
After falling sharply against other currencies, the yen stabilised, reducing what had been a significant advantage for exporters. Financial and real estate companies gave back some of their share price gains, reflecting a cooling of expectations that the country will reach a healthy level of inflation. Technology stocks underperformed because of new US tariffs on Japanese imports and weaker demand for semiconductors. Car makers were broadly steady, supported by momentum in electric vehicle sales.
The Bank of Japan kept interest rates unchanged but reiterated its readiness to raise them if inflation remains persistent.
Asia Pacific (excluding Japan
Stock markets in Asia Pacific fell over the month, with the MSCI Asia Pacific (excluding Japan) Index down 3.7%. This was a result of investors taking profits, which hit technology-heavy markets, along with trade concerns resurfacing.
South Korea and Taiwan led the declines, with their respective MSCI indices posting returns of -8.7% and -5.8%, as semiconductor stocks corrected after months of AI-driven gains. Chinese stocks remained weak, with the MSCI China Index dropping 3.3% amid shrinking manufacturing activity and continuing problems in the property sector.
Indian stocks were flat, with strong seasonal demand and positive economic data helping to avoid a fall. Meanwhile, Southeast Asia was mixed, with stocks in Vietnam making gains and Malaysia slightly up, while stocks in Thailand fell over the month.
Overall, November marked a pause in the region’s positive run, with falls in technology stocks and China’s economic slowdown weighing on investor sentiment as the end of the year approaches.
Emerging Markets
Emerging market stocks ended a strong ten-month run in November, with the MSCI Emerging Markets Index down 3.2% (as mentioned above), marking its steepest monthly decline in a year. The reversal reflected investors taking their profits in technology-linked stocks, along with uncertainty about interest rates.
However, Brazilian stocks delivered a strong performance, with the MSCI Brazil Index up 6.8%, supported by resilient domestic demand and steady commodity prices. The MSCI South Africa Index also advanced, with a rise of 3.2%, as the country benefits from higher prices for metals.
Bonds
US government bond yields rose mid-month before falling after comments from John Williams, President of the New York Federal Reserve, increased expectations of a US interest rate cut. Markets are now pricing in an approximately 80% probability of a rate cut in December.
Bond investors largely viewed the UK Budget as neutral, being a ‘spend today, tax tomorrow’ plan and they responded positively to a reduction in the supply of longer-dated UK government bonds*. With inflation easing, the Bank of England looks well positioned to deliver a rate cut.