Financial markets continued to rally in November. Markets have been resolute in the face of a multitude of geopolitical uncertainties in 2019. The negotiations between the US and China on a ‘phase one’ trade deal is yet to arrive at a conclusion, however, hopes of a deal appear to have buoyed market sentiment. In the UK, the spotlight has shifted to the upcoming general election on December 12, which has the potential to give some clarity to the Brexit saga. During the month, US stocks gained 3.63% and Bloomberg Barclays US Aggregate Bond index lost 0.05% in November.
High Quality Stocks continued their dominance in November, besting the S&P 500 by 67 basis points. Year-to-date, High Quality stocks lead the S&P 500 by 5.96% (33.59% vs. 27.63%). From a style perspective Large Cap Growth and Small Cap Growth stocks were the best performing asset class in November, rising 4.44% and 5.89% due to strong gains in Health Care and Technology stocks.
All but two Global Industry Classification Standard sectors (GICS) were positive in November with Real Estate and Utilities being the only laggards, down 1.72% and 1.84% respectively. Health Care, Technology, and Financial sectors led the way, up 5.04%, 5.04%, and 5.38%, correspondingly.
Dollar strength detracted returns for US investors in Developed Markets and Emerging Markets. The Dollar Index, which measures the US Dollar against Developed Market currencies, gained about 0.95% in November. The MSCI EAFE index gained 2.09% in local currency terms but gained only 1.13% in US Dollar terms. The MSCI Emerging Market Currency Index weakened by 0.47% versus the US Dollar in November. The MSCI Emerging Markets index gained 0.58% in local currency, but the conversion to US Dollars caused that gain to become a 0.14% loss for US investors. Brexit and trade war consternation continues to be the market moving headline.
Rates roses across the yield curve causing the Bloomberg Barclays Treasury Bond Index to fall 30 basis points in November. The rising yield curve led to some significant spread compression that drove returns for Investment Grade and High Yield Credit.
High Yield Bonds rallied 0.33% in November. High Yield spread to 10 Year Treasury bonds fell by 19 basis points to end the month at 3.81%. The long-term average spread is about 5.13%. High Yield bonds yielded approximately 5.59% at the end of November. Investment Grade Corporates rose 0.25% in November. Year-to-date Investment Grade Corporates and High Yield Corporates are up 13.89% and 11.71%, respectively.
In international fixed income, German 10 Year Bunds rose 5 basis points and closed the month negative -35.4 basis points. US Dollar strength detracted from Emerging Markets Debt in November, losing 1.82%. Year-to-date Emerging Markets Debt is up 8.97% and currently yields about 6.53%.
The Bloomberg Commodity Index lost 2.56% in November. While Oil and Gas were up in November (+1.82 & +1.35%), the Bloomberg Precious Metals Index, which led in October, lost 3.80% in November, led lower by Gold, which lost 3.12%. However, Palladium, which is used in autocatalysts, was the outlier in Precious Metals, gaining 1.75% in November. Year-to-date Palladium is up more that 51%. REITs which had been positive almost every month so far this year lost 1.54%. REITs are up 27.88% year-to-date.
November 2019 Indexes
November 2019 Market Review is intended solely to report on various investment views held by Fidelity Deposit & Discount Bank and is distributed for informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. Fidelity Deposit & Discount Bank does not have any obligation to provide revised opinions in the event of changed circumstances. All data is provided by Bloomberg Finance, LP and Morningstar Direct. We believe the information provided here is reliable but should not be assumed to be accurate or complete. Data as of 9/30/2019. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security. Past performance is no guarantee of future results. All investment strategies and investments involve risk of loss and nothing within this report should be construed as a guarantee of any specific outcome or profit. Investors should make their own investment decisions based on their specific investment objectives and financial circumstances and are encouraged to seek professional advice before making any decisions. Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. The S&P 500 Index is a market index generally considered representative of the stock market as a whole.