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Monthly update – November 2023

The end of the rate hiking cycle and rallies in both equities and bonds! After three dismal months where investors fretted about rising bond yields, uncertainty over inflation and/or recession, and the geopolitical situation, sentiment positioning was at a year low at the end of October. In November, however, all these concerns seemed to dissipate and markets rallied. Global stocks posted the best monthly return in two years. Also, following an almost three-year stretch of falling returns, bonds again attracted investors and yields fell significantly, making for the best month since the fall of 2008. Aggregated, cross asset risk appetite rose to its highest level in two years.

Decisions interpreted as the end of the hiking cycle

Central banks in the US and Europe refrained from increasing their interest rates and conveyed the message that inflation was trending down, and that they expected to reach the targets before too long. Even though some central bankers warned that the fight against inflation was not over, the decisions were interpreted not only as the end of the hiking cycle of the last two years but also that rates would be cut in 2024.

However, investment bank strategists continued to be divided about what to expect of earnings growth next year as falling inflation and subsequent rate cuts could portend weaker demand and profit margin pressure.

A temporary truce

Following the Hamas terrorist attack in October, the Israeli response by invading the northern parts of the Gaza strip continued relentlessly in November. The forceful Israeli actions, aimed at once and for all eliminating the threat that Hamas poses, led to widespread demonstrations in many countries. The initial sympathy for Israel following the attack changed into protests in favor of the Palestinians, showing the polarized view of the situation in the region. A truce between Israel and Hamas for some days was reached, mediated by Qatar, resulting in the exchange of hostages against imprisoned Palestinians.

 Energy market in focus

The energy market continued to be in focus in November. As the war in the Middle East erupted, oil prices rose as traders saw a possible escalation throughout the region. Efforts by the major powers to confine the conflict, for example Saudi Arabia’s pledge to invest in Iran, dampened those fears. Instead, the prospect of increased production in countries like Iran and Venezuela combined with lower demand made prices fall throughout November.

Campaigns ramping up in the US

With the US presidential election less than a year away, the temperature rose in both parties. Among the Democrats some voices argued that the elderly Joe Biden should not run again, while some Republicans began promoting Nikki Haley as a contender to Donald Trump.

World index up

The world index increased significantly in November as oversold conditions were reversed. Significant FX changes, not least the weakening of the US dollar, meant that returns differed depending on the base currency. Information technology and consumer discretionary led the advance while consumer staples and energy lagged. Looking at the regions, the US outperformed Europe and Japan, while Hong Kong fell.



The period of interest rate hikes by central banks should now be over in both the US and Europe. US 10-year yields fell by 0.6 percent in the US during November; such a large decline is rarely seen in a single month. Stocks rose significantly as the financial tightening in the economy eased as a result of rising bond values. The present value of discounted stock dividends rises with falling interest rates, which gives further support for higher stock prices.

Volatility to be expected

We see clear signs of a turnaround for growth stocks, large as well as small- and midcaps. Even shares in companies that are not yet profitable will receive some support because the stock market anticipates that the possibility of financing future operations may improve in the coming year. There are many indications that the strong month of November could continue. However, we should be prepared for more volatility if the market interprets that the real economy is losing momentum, or that inflation in the coming months will not drop significantly. We make the optimistic assessment that the strong market may well continue. So far, we assess the risk of a recession in the US as low and inflation should continue to fall, albeit at a slower pace. Medium-sized quality companies should continue to be rewarded in a rising market, as it is the so-called generalist investors who have the greatest resources to increase their exposure to the healthcare sector.