Market Summary | November 2020

MARKET OVERVIEW

November was a strong month globally for equity markets as momentum continued following the US election.

The easing of Covid-19 restrictions locally, a string of better-than-expected economic data, and positive news from vaccine trials all contributed to the rally.

UNITED STATES

November was a record-breaking month for global equities. In the US, the focus shifted to the deployment of vaccines country wide following successful trials, while Joe Biden firmed as the apparent victor of the presidential election.

The Dow Jones blew past 30,000 points and the S&P 500 Index rose above 3,700 points in early December, even as record new cases of the coronavirus were reported.

Although a strong month for share markets, November proved tricky for some stock pickers, as a strong factor rotation from growth to value stocks was experienced following the news around successful vaccine trails.

Additional fiscal stimulus is firmly back on the agenda. A bipartisan group of senators will propose a fresh US$908 billion package, including US$288 billion in small business aid and US$180 billion in unemployment benefits.

The S&P 500 Index (USD) returned 10.75%
The Dow Jones (USD) returned 11.84%

ASIA

China is preparing for a large-scale rollout of its own domestically developed coronavirus vaccines. At least five vaccines from four producers are being tested in more than a dozen countries including Russia, Egypt and Mexico, while around one million Chinese health care and other workers deemed at high risk have already received the vaccine.

China has ramped up its trade conflict with Australia, putting tariffs of up to 200% on Australian wine and suspending the importation of beef from a sixth Australian supplier. Timber log imports from QLD, VIC, TAS and SA have also been suspended, along with previously advised barley. China’s list of concerns includes the banning of Huawei and ZTE from Australia’s 5G network, as well as Australia’s “incessant wanton interference in China’s Xinjiang, Hong Kong, and Taiwan affairs”.

The Hong Kong Hang Seng PR Index (HKD) returned 9.27%
The Nikkei 225 PR Index (JPY) returned 15.04%
The Shanghai Shenzhen 300 PR Index (RMB) returned 5.64%

EUROPE

Europe’s recovery has set in, even as the region battles resurgent coronavirus numbers and national governments implement new post-lockdown restrictions ahead of the festive season. France’s President Macron announced a three-stage easing of the country’s lockdown, like that of Victoria.

Cyclical sectors, including energy and financials, regained favour, while previously beaten down sectors like travel and retail posted strong gains.

The UK’s FTSE 100 PR Index (GBP) returned 12.35%
The German Dax (EUR) returned 15.01%

AUSTRALIA

Australia’s economic recovery has found solid footing, underpinned by low Covid-19 case numbers nationwide and news of successful vaccine trials. After weeks of zero new case numbers, Victoria has relaxed its restrictions. Up to 100 people can attend public gatherings such as weddings, while one quarter of office workers can return to the office (this will increase to one half from 11 January 2021).

At its December meeting the Reserve Bank of Australia left interest rates unchanged at a record low 0.10%. The board anticipates no increase in the cash rate for at least three years, while the size of the bond purchase program will remain under review and dependent on the outlook for jobs and inflation.

GDP grew 3.3% in the September quarter, beating expectations of 2.6%. Household consumption gained the most on record, increasing 7.9% following the sharp fall in the previous quarter of 12.5%, while government spending rose 1.4%.

The ASX 200 Index posted a return of 10.2% in November, building on October’s momentum as the rotation into cyclical sectors continued. It was not all smooth sailing, however, with some businesses hit hard by Chinese trade measures.

Treasury Wine Estates went into a trading halt after the Chinese Ministry of Commerce announced it will apply provisional anti-dumping measures on Australian wine. Treasury plans to reallocate its Penfolds Bin and Icon ranges from China to other luxury growth markets and will switch its luxury grape sourcing to other premium Australian portfolio brands.

MARKET RETURNS (LAST 12 MONTHS)

International Equities have significantly outperformed domestic equities over the last 12 months largely driven by advancing technology companies which have been a big beneficiary of the COVID-19 environment.

Returns on cash and fixed income remain subdued.

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.

*Source: Lonsec Research Pty Ltd