TRUMP WINS CONVINCINGLY THE US ELECTION AS COUNTRIES PREPARE TO A RAFT OF TARIFFS AND NEGOTIATION.
EQUITY MARKETS
The concept of ”America First” is evident in the US equity markets, which continue to outpace global peers. Small- and mid-cap equities in the US have garnered significant investor attention, with the Russell 2000 and the S&P Midcap 400 indices achieving impressive gains of nearly 11% and 8.8%, respectively, in November. This outperformance reflects the resilience of the US economy, bolstered by investor optimism surrounding potential corporate tax cuts and economic policies introduced during the Trump administration. However, concerns about the medium-term fiscal sustainability of these policies remain due to expected federal budget adjustments. Outside the US, performance in global equity markets was varied. In Europe, the CAC 40 Index in France lagged its peers, reflecting current political instability and budgetary challenges tied to its fragile coalition government. Conversely, Spain’s IBEX 35 Index emerged as a regional leader, delivering a robust year-to-date (YTD) return of 20.27%. In Hungary, the Budapest Stock Index gained 5.51% in November, with analysts attributing this success partly to the favourable relationship between Hungarian Prime Minister Viktor Orbán and the Trump administration.
In company news, Volkswagen continued to report challenges, citing factory closures and the write-down of its 21% stake in Northvolt, as the Swedish battery maker files for Chapter 11 bankruptcy. General Motors announced plans to enter Formula One motor racing under the Cadillac brand in 2026, positioning it as the 11th team in the competition. In the banking sector, UniCredit has made a €10.1 billion takeover bid for Italian rival Banco BPM. If successful, this acquisition would position UniCredit as Europe’s third-largest lender by market capitalization. Meanwhile, Thyssenkrupp has announced a significant 40% reduction in its workforce as the German industrial giant grapples with stiff competition from Chinese imports and an oversupply of steel in Europe. In healthcare, Brookfield Asset Management has withdrawn its bid for Grifols, a Spanish healthcare group. Grifols has faced scrutiny from short-sellers over allegations of manipulating its debt and earnings. On a more positive note, EasyJet reported a 34% increase in pre-tax profits, marking a second consecutive record-breaking summer. The company remains optimistic about the travel outlook moving forward.
SECTOR PERFORMANCE
All sectors in the U.S. posted positive returns, with Consumer Discretionary leading the pack, delivering an impressive monthly gain of 13.34%. Financials followed closely, up by 10.28%, driven by heightened investor interest as potential deregulation initiatives under the Trump administration are anticipated to make banking more accessible and adaptable to economic changes. Overall, sector movements were largely cyclical, with defensive sectors underperforming but still achieving positive returns.
In contrast, Europe experienced mixed results, with several sectors facing declines. Materials, Consumer Staples, and Energy sectors contracted over the month, reflecting broader challenges. However, there were bright spots as Information Technology, Communication Services, and Industrials each delivered gains exceeding 3%, highlighting pockets of resilience in the European market.
GEO-POLITICS AND CENTRAL BANKING
Geopolitical developments have been in full swing, with the U.S. election impacting the global political balance. Europe has emerged as a hotspot for political uncertainty. Germany’s federal election, scheduled for February 23, will play a crucial role in shaping the future of Europe’s largest economy. The election, happening seven months ahead of schedule, was triggered by the collapse of the ruling coalition last November. Support for the “traffic light” coalition—comprising Chancellor Olaf Scholz’s Social Democrats (SPD), the Greens, and the Free Democrats (FDP)—has notably declined since the last election in September 2021. Meanwhile, the centre-right Christian Democratic Union (CDU) and its Christian Social Union (CSU) alliance have made notable gains in the polls, as have the far-right Alternative for Germany (AfD) and the populist left-wing Sahra Wagenknecht Alliance (BSW).
Michel Barnier’s tenure as France’s prime minister may be nearing its end, with his government on the brink of losing a no-confidence vote expected later this week. This pivotal parliamentary showdown comes after days of escalating tension and carries the potential to create financial uncertainty in the eurozone’s second-largest economy, raising alarm across the European bloc. Amid this uncertainty, Barnier has been working to calm anxious markets while striving to secure approval for a budget aimed at addressing a significant shortfall in France’s finances. The outcome of the vote will not only determine the prime minister’s political future but could also have far-reaching economic consequences.
The Federal Open Market Committee (FOMC) convened on November 6–7, 2024, to discuss recent economic developments, financial market conditions, and monetary policy adjustments. Following a comprehensive evaluation, the Committee decided to lower the target range for the federal funds rate by 25 basis points to 4.5–4.75%. This decision is aimed to support continued economic expansion and further progress toward the inflation target while maintaining balance in the labour market. The FOMC’s actions reflect a continued focus on sustaining economic momentum while addressing inflationary pressures. The Committee remains committed to monitoring economic and financial conditions closely, ensuring that policy decisions align with its long-term goals of price stability and maximum employment.
COMMODITIES
Despite the historically strong correlation between commodities and geopolitical events, broad commodity indices remained relatively flat in November, even amid significant developments such as the Republican Party’s victory in the U.S. elections. However, certain commodity categories experienced notable price movements. The energy sector saw most of the action, with natural gas prices surging. TTF next-hour prices and U.S. LNG prices increased by over 20% during the month, contrasting with relatively stagnant or negative trends in crude oil and broader energy prices. In Europe, LNG prices faced mid-month volatility following Austrian energy company OMV’s legal victory against Gazprom, which resulted in a €230 million ruling due to contractual breaches and irregular supplies. This also raised concerns about potential disruptions to Russia’s supply, which now represents just 5% of Europe’s LNG imports. Former President Trump’s stance on lifting the moratorium for new LNG export facilities is expected to bolster supply. Meanwhile, Europe remains heavily reliant on LNG, with consumption driven largely by weather conditions. On the trade front, LNG imports may become a strategic bargaining tool in U.S.-Europe negotiations, potentially helping reduce trade deficits—a mutually beneficial outcome.
CURRENCIES
The U.S. dollar strengthened during November as investors sought higher-yielding U.S. assets, a continuation of the so-called “Trump trade.” Despite Trump’s advocacy for a weaker dollar to boost exports, foreign interest in U.S. assets drove record net capital inflows of approximately $380 billion, propelling the U.S. dollar index upward. The U.S. dollar weakened slightly against the yen, breaching the ¥150 level and closing at ¥149.77. This was driven by unexpectedly high inflation in Japan, raising expectations that the Bank of Japan (BOJ) might hike rates in December. The BOJ’s policy divergence from other developed central banks remains a focal point, as a strong yen could influence its rate decisions. The pound continued to decline against the dollar for the second consecutive month. The dollar’s momentum was supported by optimism around the U.S. economy’s “soft landing” narrative and Trump’s “America First” policies. Elevated core inflation in the UK has left the Bank of England cautious, with no rate cuts expected in December.
OVERALL
Global markets and economies continue to navigate a complex landscape of geopolitical tensions, economic adjustments, and evolving policy decisions. U.S. equity markets remain resilient, outpacing global peers with notable gains across sectors, especially Consumer Discretionary and Financials. However, concerns about the sustainability of fiscal policies underline the importance of prudent economic management. In Europe, challenges persist as political instability and economic uncertainty weigh on market performance. While some sectors and regional markets, such as Spain’s IBEX 35, show promise, others face significant headwinds, reflecting broader structural and political issues. The upcoming German elections and France’s parliamentary crisis add further layers of unpredictability, underscoring the need for stability in the eurozone.
