Market Update - November 2015

Market Commentary

Despite a mid-month sell off in many developed markets, November ended as a fairly steady month for most global markets. Volatility in global markets also remained reasonably low for the majority of the month in the wake of a significant spike in volatility in August and September.

The Australian market began the month well as investor sentiment improved with the Reserve Bank of Australia indicating some possibility of a further rate cut. This was short lived as US led weakness eroded early gains. The sell-off was also driven by falling commodity prices

The timing of an interest rate rise by the US Federal Reserve remained a talking point. Despite geo-political tensions such as the Paris terror attacks reducing consumer confidence, continuing employment and income growth improved the likelihood of a rate rise in December. US markets saw minor improvements on October’s gains with the S&P500 returning 0.2% for the month.

European markets performed reasonably well in November, compounding on strong growth in October. Geopolitical tensions including terror attacks in Paris and Mali and the shooting down of a Russian jet had minimal impact on European markets. Continued speculation that the European Central Bank would enhance its existing quantitative easing program was also a positive for European financial markets.

The Chinese Shanghai Composite Index rose 1.9% despite falling approximately 5% in the last days of the period. The sell-off in China was linked to investigations into the country’s largest brokerages for possible misconduct. This volatility was enough to drive down most Asian markets into negative territory for the month. A notable exception was the Nikkei 225 index which rose 3.5% despite the release of slightly disappointing Japan GDP figures.

The investment returns of the major markets for one month, one quarter and financial year to 30 November 2015 are summarised below.

Locally, the S&P/ASX300 Accumulation Index posted a slightly negative monthly performance of -0.7%, after strong growth in October. Small Cap stocks were flat, outperforming the broader market. Health Care (5.2%) and IT (4.5%) stocks outperformed, while Materials (-12.2%) was the worst performing sector.

The MSCI World ex-Australia Index (hedged into AUD) rose by 0.9% over the month. The Australian Dollar appreciated in November, which resulted in a return of -2.0% (in AUD) on an unhedged basis. Across developed markets, Belgium (9.8%), Denmark (7.9) and Ireland (7.6%) outperformed while Greece (-21.8%) and Singapore (-4.8%) were the weakest performing countries in local currency terms. The MSCI Emerging Markets Index (-5.4%) underperformed developed markets.

Australian bonds had negative returns for the month and quarter, underperforming global bonds.