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Our monthly portfolio positioning commentary.
The US stock market rose sharply in November as investors considered the implications of the clean sweep Republican US election victory. Outside of US markets, the election results were met with some caution, mainly due to the threat of a fresh round of tariffs being imposed. This was most impactful on emerging markets and specifically in China, where equities declined due to concerns about a potential trade conflict with the US and negative investor sentiment towards the government’s economic support measures introduced to revive the econom
In October, financial markets were volatile despite robust economic data from the US. Equities on the whole delivered negative performance, with US equities performing the best among developed markets. Weaker-than- expected earnings from Apple, Meta, and Microsoft impacted US equity performance, while European equities under-performed due to weaker corporate earnings reports. Emerging market equities faced challenges, mainly driven by Indian, and to a lesser extent, Chinese, equities.
Fixed income assets struggled over the month, with bonds selling off as yields rose. However, gold rallied to a new high.
In September, equity markets faced challenges but recovered due to a pick-up in macroeconomic data and expansionary monetary policy, which alleviated recession concerns. Both the US Federal Reserve and the European Central Bank (ECB) delivered rate cuts of 0.5% and 0.25% respectively. Additionally, positive momentum in China helped contribute to global equity performance. Global equities ended the month in positive territory.
August was a positive, but volatile month for bonds and equities. At the start of the month, the interest rate rise in Japan and weak economic data in the US, initially led to equity markets selling off, which was also further impacted by the political uncertainty around the US presidential election.
July was a volatile period for equity markets. Weaker economic data from the US including inflation, employment reports and the manufacturing / services surveys led to increased anticipation that the US Federal Reserve is likely to cut rates at the September meeting. Additionally, we saw corporate earnings results surprise to the downside for some companies, which drove some underperformance within equities and the Magnificent 7, which have driven positive market performance so far this year
June saw mixed performances for financial markets, with US equities continuing to increase, aided by the the continued performance of the “Magnificent 7”. Emerging Market equities were slightly up over the period, driven largely by India and Taiwan’s strong performance . However, in Europe, we saw political developments come into focus with European parliamentary elections and snap legislative elections in France, which caused a subsequent fall in European equities.
The economic outlook continued to improve in May, which generally supported risk assets. Investors are more optimistic despite interest rates remaining high, as the path for future interest rates cuts became clearer.
Generally, developed equity markets outperformed emerging markets. The top performing markets being the US, Europe and the UK.
On the whole, global bonds made a positive return, but there was again regional divergence, with yields having risen in Europe despite expectation of an interest rate cut in June. Yields fell in the US, which produced a positive capital return.