In November, financial markets were in good spirits, with positive returns for most asset classes. First, we still saw negative outcomes in equities and rising interest rates following rate hikes by the Bank of England and the Federal Reserve. The latter in particular indicated that the path of interest rate hikes will look different; the increases will be less harsh but with a higher final interest rate target. Later in the month, better-than-expected US inflation data reassured markets, so we still ended the month on a positive note. The mid-term elections in the US (in which the “red wave” of Republicans stayed out) and the easing of Covid policies in China also helped. In Egypt, participating countries at COP27 agreed to establish a global fund for countries vulnerable to the impacts of climate change. Nevertheless, the outcomes were disappointing as more far-reaching agreements had been anticipated in advance.
Shares
Measured in euros, the MSCI All Countries World Index rose 3.4% in October. However, there was a big difference between developed markets (+2.7%) and emerging markets (+10.2%). Whereas China pulled the latter index down with it last month, it was the leader this month with +24.5%. There was also a significant difference between Europe (+6.9%) and the U.S. (+1.2%). Japan was in between with a plus of 5.3%. Growth stocks and value stocks kept each other in balance in November. Among sectors, commodities was the biggest winner (+9.4%), alongside financials and industrials. Energy was the only sector with a negative return (-0.6%).
Bond
The aforementioned better-than-expected inflation data in the U.S. caused interest rates there to fall more sharply than in Europe. German 10-year rates fell 0.21% to 1.93%. U.S. 10-year rates fell 0.44% to 3.61%. The relief also created a slightly riskier attitude among investors. The risk premium for less risky corporate bonds fell 0.37% to 1.79%, and for more risky corporate bonds fell 0.41% to 5.08%.