Selected Market Indicators for Periods to 30 November 2021

Financial markets ended the month of November on tumultuous footing as rising hospitalizations in Europe due to the Coronavirus alongside the new Omicron variant of the Coronavirus spurred uncertainty in what would have been a broadly positive month for risk equities. This spike in uncertainty is in addition to further restrictions in Europe as Coronavirus cases spike in the region. Consumer inflation remained high across the US, UK and Eurozone with the market concerned that hawkish sentiment from central banks will be accelerated due to consistently higher price levels.

The Federal Reserve hinted that further tapering is on the horizon, and that “substantial further progress “in the economy would see a $15 billion a month reduction in asset purchases from their current $120 billion asset purchase program. Analysts have attributed high equity valuations partially due to the Federal Reserve’s asset purchase program. But concerns have risen that investors may struggle to justify paying higher premiums on equities once the asset purchase program tapers off.

The MSCI All Country World Index was broadly positive for the majority of November, however ended the month down -1.7% as volatility struck in the final few days. Despite this, the index was positive, up 2.9% as a result of currency movements. The U.S 10 Year ended the month around 8 basis points lower than at the start of the month, to 1.484%.

Significant developments for November included:

• “Probably a good time to retire that word”, Jerome Powell, Chairman of the Federal Reserve stated as he admits the central bank should stop using the word “Transitory “as Inflation across the world continues to however at record levels. Latest data showed that U.S CPI increased 6.2% in October, the fastest in 31 years.
• The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 0.25% to 0.75%. They state despite lockdowns, “underlying economic strength remains supported by aggregate household and business balance sheet, fiscal policy support and strong export returns” and that “the New Zealand economy continues to perform above its current potential”. The CPI saw its largest jump in 12 years, up 4.9% as global supply constraints continue put upwards pressure on prices of goods and services.
• WTI Crude Oil dramatically fell 13% in a single trading session as the Omicron variant increased concerns of lower consumption alongside the U.S announcing that they would release 50 Million Barrels of Crude Oil to soften Oil prices.