Market Analysis Nov 2020

US equities surged in November as news of successful Covid-19 vaccine breakthroughs sparked hope for an eventual return to economic normalcy. The impact of these breakthroughs overshadowed the victory of President-elect Joe Biden in the US presidential election and concerns about the transition of power. Sectors closely tied to economic conditions, such as energy, financials, industrials, and materials, experienced substantial gains. Additionally, the US dollar weakened.

The MSCI EMU index witnessed an impressive 17% surge in November, largely due to positive vaccine news. This optimism extended to eurozone shares, especially given the region's significant exposure to global trade. Encouragingly, decreasing Covid-19 infection rates in various European countries led to the gradual easing of lockdown restrictions. The energy and financial sectors were standout performers during this period.

UK equities performed well in November, propelled by positive vaccine developments that helped them recover from their year-to-date underperformance compared to other regions. Additionally, hopes that a "no-deal" Brexit could be averted before the transition period's end on December 31 boosted market sentiment. Notably, there was a notable shift towards value stocks, prompting discussions about a potential challenge to the long-standing dominance of growth stocks.

November marked a significant milestone for the MSCI Asia ex Japan index, which achieved its highest return in over four years. This remarkable performance was fueled by positive vaccine news that uplifted investor sentiment, amplified by a decline in the US dollar. Within the index, Thailand and Singapore, both ASEAN markets, stood out with robust growth. On the flip side, China's market leadership shifted, causing a rotation within the market, and Japan's equity market experienced a surge driven by vaccine-related news and the US election results.

November brought volatility to government bond yields. Despite ending three basis points lower at 0.84%, the US 10-year Treasury yield experienced significant fluctuations around the US election and vaccine-related announcements. In Europe, German and French 10-year yields slightly rose, while peripheral yields dropped to low levels due to positive vaccine news and expectations of increased bond purchases by the European Central Bank. Corporate bonds displayed strength, with global investment grade and high yield bonds generating strong total returns. Emerging market hard currency bonds and corporate bonds gained, driven by high yield. Convertible bonds benefited from the equity market's robust performance, with the Thomson Reuters Global Focus index reflecting their positive trajectory.

It's essential to emphasize that past performance doesn't necessarily predict future outcomes. The sectors, securities, regions, and countries mentioned are for illustrative purposes only and should not be construed as recommendations for buying or selling.