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Weekly comment: Markets buoyant at end of stellar November

Date: 08 December 2023

4 minute read

Weekly podcast – Market overview

This week’s host, Investment Manager Andrew Cartwright discusses the ups and downs of the past week with Head of Fixed Interest Research, Richard Carter and Carly Moorhouse, Fund Research Analyst. Among the topics discussed – the UK housing market, inflation decline and much more.

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Market overview: Alan McIntosh, Chief Investment Strategist

Stock and bond markets rounded off a stellar November on the front foot with the MSCI All Country World Index rising over 9% to post its best monthly return in three years. A strong fall in bond yields supported the move higher as investors have further embraced a soft-landing scenario that would mean the lowering of interest rates next year. Most developed government bond markets gained, with US Treasuries in particular outperforming to chalk up their best monthly returns since the 1980s.

Last week was really a case of more of the same as markets continued to move as if further central bank rate increases are increasingly unlikely and that some policy easing is not too far away. Economic data and central bank speeches supported this notion with a further decrease in the Federal Reserve’s preferred inflation gauge showing the core personal consumption expenditures (PCE) price index coming in at 3.5% year on year. This is the lowest level for this metric since April 2021. Economic activity also appears to be slowing with the ISM manufacturing PMI for November coming in at 46.7 for the second month running.

US stock benchmarks rose 0.8% last week, in line with global indices, meaning they closed out November with a gain of just over 9%. Technology stocks lagged a little on the week but outperformed on the month with benchmarks posting a 10%+ increase for their best monthly performance since July 2020. Slowing inflation and softer economic data spell good news for bonds and the 10-year US Treasury yield dropped 27 basis points on the week to take November’s decline to 61 basis points. Bond prices rise as yields drop. 

UK spread narrowing

The difference in yield between UK and US government bonds narrowed further last week, with a 14-basis point decline in the 10-year gilt yield. This closely watched metric ended the week at 4.14% compared to 4.20% for the US 10-year equivalent. The narrowing has occurred mainly due to a faster decline on the US side as data has softened relatively more across the Atlantic of late and Federal Reserve policymakers have struck more dovish tones than their UK counterparts.

Last week, Bank of England (BoE) Governor Andrew Bailey once more pushed back against market expectations for a reduction in the base rate. UK inflation remains stubbornly high while a better-than-expected economic performance year-to-date, albeit against pessimistic expectations, has allowed rate setters a little more leeway in maintaining restrictive policies.

UK stocks rose 0.6% last week to take November returns to 2.3% and leave the market higher by 4.7% year-to-date. The pound was boosted by tightening interest rate differentials to end the week at 1.27 against the US dollar.

Commodities have come into the spotlight in recent trade as gold surged to an all-time high price above US$2100 per troy ounce. Growing expectations for lower interest rates have attracted buyers, while ongoing geopolitical tensions have also added to the precious metal’s appeal for those viewing it as a safe haven.


Andrew Cartwright

Investment Manager

Carly Moorhouse

Fund Research Analyst

Richard Carter

Head of Fixed Interest Research

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