November 2024 Market Report
Risk-assets rallied strongly in November, buoyed by the return of former President Donald Trump and the prospect of lower taxes and further tariffs. The Reserve Bank of Australia kept rates on hold at 4.35%. Precious metals retraced in response to a rising US Dollar.
Global Markets
The election of Trump to a second presidential term dictated market performance in November. Republicans, albeit with small majorities in the House and Senate, recorded a “clean sweep” in the 2024 US Election and are now positioned to legislate much of Trump’s economic mandate. This includes cuts to individual and corporate tax rates, winding back red tape and the potential for sweeping tariffs on trading partners, most notably China.
The pro-business policy agenda and more nationalist approach to trade meant the S&P 500 recorded its strongest month for the year returning 5.7%. The US Dollaralso strengthened in anticipation Trump’s policies could refuel inflation and reduce the amount of interest cuts by the US Fed. Positive economic data, notably better than expected retail sales and purchasing manager indexes, further underscored market exuberance.
The combination of a new US trade policy and weak corporate results meant MSCI Europe ex-UK fell 0.1%. MSCI Emerging Markets, many of which have trade surpluses with the United States and remain vulnerable tariff targets, fell 2.8% at the prospect of higher duties. The MSCI China index receded 4%.
Commodities recorded a modest gain, with the Bloomberg Commodity Indexappreciating 0.4%. Gains in natural gas and oil were overshadowed by profit-taking in precious metals such as silver and gold. The stronger US Dollar led investors to reassess the relative appeal of the two safe havens.
Australian Markets
The S&P/ASX 200 returned 3.4% in November following the lead of the US. Technology led the charge, followed by the Consumer Discretionary and Financial sectors. The local benchmark has recorded strong returns year to date, with most of value uplift derived from multiple expansion rather than earnings per share growth. Valuations for local benchmark remain stretched, and therefore investors should expect more modest near-term returns.
Source: J.P. Morgan
At its November meeting, the Reserve Bank of Australia again held the cash rate at 4.35%, marking a year of unchanged interest rates. The RBA remains of the view that inflation, specifically underlying, remains too high. Monthly inflations figure from the ABS reinforced this view, with headline inflation of 2.1% but trimmed meaning inflation at 3.5%. The central bank’s Statement of Monetary Policy does not see inflation “returning sustainably to the midpoint (2.0-3.0%) of the target until 2026.”
Put simply, demand remains too strong. Households have cut discretionary purchases to meet rising cost of living and higher mortgages repayments. Businesses have limited spending and investment. However, this has been replaced by the expansion in public spending and new arrivals. While the labour shortages seen in 2022 are abating, evident by the two year-low in the wage price index to 3.5%, the vast majority of Australians remain gainfully employed, thereby keeping aggregate demand high. The unemployment rate remained relatively stable at 4.1%, well below the pre-pandemic average.
