Market Update - November 2020.

The month of November saw positive returns across most asset classes, in what was a very strong ‘risk on’ month, particularly for equity markets. This strong performance was the result of positive news developments regarding three major Covid-19 vaccines, although cases of Covid-19 continued to rise in the USA and the number of cases across Europe was still high.

In Australia, November saw the further relaxing of restrictions in Victoria and the commitment of various state governments to reopen borders between states. The release of labour market data for the month of October showed a slight increase in the unemployment rate (7.0%), but with an improvement in the participation rate, the number of employed people and total hours worked. Business and Consumer confidence also rose over the month, coupled with improving PMI data.

In the USA, coupled with the election of Joe Biden as President, the Democratic Party also retained control of the House of Representatives. The Federal Reserve voted to maintain short term borrowing rates between 0% and 0.25% and did not announce any new policy initiatives to further stimulate the economy. In Europe, the increased level of restrictions across European countries led to some contraction in the services sector while manufacturing remained in expansion mode. Consumer confidence fell in both the Eurozone and the UK, reflecting ongoing uncertainty about employment and the business outlook.

The investment returns of the major markets for one month, one quarter, financial year to date, and one year to 30 November 2020 are summarised below.

Market Performance - 30 November 2020

Month

Quarter

FYTD

1YR

Australian Equities

10.2%

8.3%

12.2%

-1.6%

Overseas Equities (Hedged into AUD)

11.6%

4.9%

15.1%

9.9%

Overseas Equities (Unhedged into AUD)

7.5%

6.0%

10.4%

5.9%

Emerging Markets (Unhedged into AUD)

4.1%

10.2%

14.3%

9.1%

Australian Property (Unlisted)

0.4%

0.8%

1.2%

-3.4%

Australian Property (Listed)

12.9%

11.3%

20.9%

-8.6%

Global Listed Property (Hedged into AUD)

11.7%

5.3%

8.9%

-15.3%

Australian Bonds

-0.1%

1.2%

1.2%

3.0%

Overseas Bonds (Hedged into AUD)

0.5%

0.9%

1.2%

4.5%

Cash

0.0%

0.0%

0.0%

0.4%

Australian Dollar vs. US Dollar

4.9%

-0.4%

7.0%

8.9%

Source – JANA, FactSet

The Australian equities market (S&P/ASX 300 Index) rose 10.2% in November with every sector in positive territory, except for Consumer Staples (-0.7%). Substantial positive results were recorded across most sectors, with Energy (28.2%) the primary beneficiary of significant rises in the price of commodities. Financials were also a strong positive contributor (16.1%), along with Communication Services (16.1%). Small Caps (10.3%) marginally outperformed the broader Index, whilst Mid-Caps (6.6%) underperformed. Australian listed property or REITs (13.2%) outperformed the broad equity market and outperformed Global REITs (9.2%).

The MSCI World Index ex-Australia (hedged into AUD) rose 11.6% during November.  In developed markets, Italy (23.5%) and Greece (27.3%) outperformed the broader market, while Israel (8.0%) and Switzerland (7.9%) underperformed. The MSCI Emerging Markets Index (unhedged) rose by 4.1%, underperforming unhedged developed markets (7.5%).

The Australian Dollar appreciated against the four major currencies over the month, including an increase of 4.9% against the US Dollar. Movements in major bond markets were mixed over the month, with small negative returns for Australian bonds and positive returns for overseas bonds.