Market Summary | November 2018
Market Overview
Globally in November we saw equity markets continue to struggle despite strong economic results from the global powerhouses, indicating an increased divergence between economic data and market movements.
The US market in particular experienced significant volatility with technology stocks suffering the worst. Until recently the tech sector was a significant driver of US market returns, making up over 20% of the S&P 500 Index. In such an environment, we believe the overall growth outlooks remains positive however, portfolio diversification becomes increasingly important.
United States
Despite remaining in line with GDP growth forecasts and strong spending within the local economy, US equity markets recorded a negative return for the month of November.
Over the last five years, stocks such as Facebook have seen their share price rise phenomenally from around US $48 in November 2014 to over US $200 in July this year. Since July, Facebook’s share price has declined due to stock specific issues, as well as momentum turning negative on tech stocks generally.
We expect market volatility to continue as the market digests the prospect of possible lower growth in the US economy in the future, and the potential for further interest rate rises.
The S&P 500 Index (USD) Returned 1.79% for the month of November.
Asia
The Chinese economy continues to show signs of slower growth, although the authorities have recently begun stepping up stimulus measures. The September quarter GDP growth result of 6.5%, down from 6.7%, was the slowest since the Global Financial Crisis.
In response, the authorities have approved tax cuts to take effect in January 2019. For now, the stimulus put in place is relatively modest, but more could be forthcoming if the trade war continues to escalate. Despite this news the Asian markets had a strong month off the back of favourable results on the trade war front.
The Hong Kong Hang Seng PR Index (HKD) returned 6.11%
The Nikkei 225 PR Index (JPY) returned 1.96%
The Shanghai Shenzhen CSI 300 PR Index (RMB) returned 0.60%
Europe
In the UK, the Bank of England warned that a disorderly exit from the EU could result in a decline in economic output of up to 8% in the first year and a rise in the unemployment rate to 7.5% under a worst-case scenario. This further highlighting the need for a well orientated departure from the EU.
Europe’s major car manufacturers have slowed production until they clear a backlog of new vehicles due to the need to prove the new emissions standards are being met, slowing productivity within the region.
The UK’s FTSE 100 PR Index (GBP) retuned -2.07%
Australia
The housing market continues to dominate the headlines in Australia. House prices are down 7.8% in Sydney and 5.2% in Melbourne over the past year. Lending to investors and ‘upgraders’ has slumped as banks tighten the lending criteria. The RBA sees the correction in house prices and the tightening of lending conditions as a healthy development, reducing financial stability risks and potentially prolonging the cycle.
The S&P/ASX 200 Index returned -2.2% through November as Australian shares appeared to miss out on the market bounce experienced in the US and Asia.
Following October’s volatility and market drawdown, losses were stemmed in the Information Technology sector, with Wisetech Global (+16.5%) and Afterpay Touch (+15.5%) partially recovering from Octobers decline.
In a reversal of recent fortunes, it was the Financial sector (+1.4%) that drove optimism through the latter part of November, with gains from Platinum Asset Management (+10.4%) and Insurance Australia Group (+6.6%) while the major banks saw mixed results.
Market Returns (last 12 Months)
November’s negative performance saw Australian Equities cross into negative return territory whilst returns from International Equities, Fixed Income & Cash remain positive.
The month of November provided negative returns across equity markets. There is now a significant gap in performance between International & Australian Equities.
The above graph summarises the performance of the major financial markets and gives you an indication of how these markets performed over the last 12 months. The graph does not reflect your actual portfolio performance.