In November, politics was the dominant factor in financial markets. In the United States, Trump won the presidential election. That pushed stock prices and cryptocurrencies higher because of the prospect of tax cuts and deregulation. In Europe, we saw increased political turmoil in Germany, where the FDP left the cabinet. Early elections will be held in early 2025. In France, it was a budget plan that led to the fall of the Barnier government. Meanwhile, the Fed cut the policy rate by 0.25% to a range of 4.5%-4.75%, this was in line with expectations. The import tariffs announced by Trump (which will affect China, as well as Europe) will rekindle inflation. Moreover, import tariffs frustrate free trade which is always associated with lowering economic growth. Investors digested all this and, on balance, it led to a somewhat lower interest rate decline in the U.S. compared to Europe.
The commodity price index was higher for the month, mainly due to the increase in gas prices (+28%).
Shares
Last month was very positive for the broad index MSCI All Countries World with a return of 6.6% (measured in euros). However, the difference between developed markets (7.5%) and emerging markets (-0.9%) was very large. In developed markets, the strong performance was mainly due to the “Trump effect” in North America (+9.2%). Pacific excluding Japan (+5.7%) was still somewhat close. Japan (+3.5%) and especially Europe (+1.1%) were in sharp contrast. Among emerging markets, only the EMEA region had a positive return for the month (+1.0%). Asia (-1.0%), China (-1.8%) and Latin America (-2.9%) clearly suffered from Trump’s impending protectionist policies.
Style growth stocks (+7.2%) outperformed style value stocks (+6.0%).
Bonds
In Europe, euro swaps averaged about 0.25% down across all maturities in November. The aforementioned political developments caused differences in interest rate movements between countries.
The 10-year interest rate in America fell by only 0.12% to 4.17%. Dutch government bonds with the same maturity (-0.32% to 2.33%) experienced almost the same development as German government bonds (-0.30% to 2.09%) as in October.
Bonds with higher risk profiles experienced limited results in November. Less risky corporate bonds saw a 0.03% increase in the risk premium (to 1.04%). A decrease was seen in more risky corporate bonds (-0.05% to 2.99%), and in emerging market government bonds (-0.02% to 3.36%).