Written by Ashwin Gurung
The MSCI All-Country World Index, which tracks the performance of global equities, returned +8.1% in November in local currency terms, marking its most impressive month since November 2020. Likewise, in the US, the S&P 500 Index and the Nasdaq 100 Index posted strong monthly gains, returning +9.1% and +10.8% in local currency terms, respectively. Similarly, the Bloomberg Global Aggregate Bond GBP Hedged Index, which tracks the performance of the global investment-grade bond market while hedging its share class to GBP, recorded its best monthly gain since May 1995, returning +3.3%.
One of the Federal Reserve’s (the Fed) most hawkish policymakers, Christopher Waller, said he was “increasingly confident” that monetary policy was in the right place. Furthermore, the Fed Chair, Jerome Powell, recognised that interest rates had reached a point considered “well into restrictive territory”, during a speech on Friday. The Fed’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) price index, which excludes food and energy, rose 0.2%, a fall from the 0.3% increase reported last month. The year-on-year increase is now down to 3.5%, which is still above the Fed’s 2% target, but looks to be heading in the right direction.
Elsewhere, in the Euro area, both headline and core inflation slowed more than expected, to 2.4% and 3.6% year-over-year, respectively. Various factors contributed to this fall, including an 11.5% decrease in energy costs, alongside declines in food and services costs. However, the European Central Bank (ECB) President, Christine Lagarde, cautioned that strong wage growth and an uncertain outlook meant that “this was not the time to start declaring victory” in the fight to curb inflation. The Bank of England (BoE) Governor, Andrew Bailey, echoed a similar sentiment, as he dismissed the possibility of rate cuts, highlighting that the BoE “will do what it takes” to reduce inflation to 2%, and added that, “We are not in a place now where we can discuss cutting interest rates – that is not happening.”
Meanwhile in China, the atmosphere appears anything but celebratory, with a record number of Chinese borrowers facing default. According to local courts, approximately 1% of the Chinese working-age population is failing to make payments across various areas, from home mortgages to business loans. This is further adding strain to the world’s second-largest economy, which is already facing deteriorating economic conditions.
As we edge toward the year’s end, central banks’ potential shift towards a less restrictive policy still hinges upon the forthcoming economic data and indicators. This week, all eyes are on the U.S. employment data, which is set to be released on Friday, widely considered as one of the best economic indicators, which has remained strong and supported consumer spending.
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