November started well for shares, however, the detection of a new Covid-19 variant, Omicron, towards the end of the month resulted in a dip in performance across global markets as people were reminded of the ever-present risk of the virus. Hospitalisation rates across many parts of Europe and the US increased with the spread of the Delta variant, which saw many regions bring in tighter restrictions.
The first two weeks of November welcomed political powerhouses to the UK for the COP26 Climate Change Conference. While markets were generally unaffected by the discussions, time will tell whether the collaborative efforts required to limit global warming to 1.5 degrees Celsius will be successful. You can read more about COP 26 in a Q&A with our Chief Investment Officer, David Semmens here.
Data released in November (for October), showed that the UK’s services and manufacturing sectors continue to grow strongly. Both these sectors exceeded economists’ forecasts and the previous month’s figures were also updated at higher figures to reflect more accurate information.
While high vaccination rates have seen pent-up consumer and business spending continue to drive strong economic growth, staff shortages and supply chain issues have been reported to be slightly restricting growth. The first set of data published since the end of the furlough scheme saw UK unemployment fall further to 4.3%, although it’s still above pre-pandemic levels which averaged at 3.8% in 2019.
Data released last month also showed UK inflation climbed higher in October, up from 3.1% to 3.8% year on year (yoy). This was driven by the increases in petrol and gas prices, as well as the ongoing supply chain issues. US inflation jumped higher from 5.4% to 6.2% yoy for October. Meanwhile, Eurozone inflation increased from 3.4% to 4.1%, a 30-year high, previously hit last month as Europe continues to battle surging energy costs and supply shortages.
After a generally positive first 3 weeks of November, events towards the end of the month led to most markets ending the period down. The discovery of the new Omicron variant combined with an announcement from the US Federal Reserve around the potential for a quicker tapering of monetary policy easing and interest rate hikes drove market sentiment lower, which weighed on stock markets. The US (-0.83%), FTSE-100 (-2.46%), FTSE-250 (-2.54%), Europe (-2.64%), Japan (-3.71%), Emerging Markets (-4.14%) and Asia ex-Japan (-4.38%) all ended the month negatively.
The performance of assets held in foreign currencies were boosted in our Plans due to the Sterling’s depreciation, which we’ll discuss below.
Sterling weakened against the Japanese yen (-3.59%), the US dollar (-2.88%) and the euro (-0.92%). The higher rates of inflation in the US, along with a further 531,000 jobs added, led markets to pull forward their expectations of an interest rate hike, which increased global demand for the US dollar. November saw the Bank of England hold its interest rate steady, which surprised markets as a change had been expected. As a result, Sterling weakened to its lowest level against the dollar since December 2020.
Investment type performance breakdown
Despite negative headlines, the performance of shares (+0.07%) were boosted by the weakening of sterling against other major currencies. The global property sector increased (+0.95%) as concerns around the Chinese property market eased. Bond prices rose (+1.06%) due to the growing uncertainty around future interest rate increases, and the further uncertainty stemming from the new Omicron variant.
Summary with Plan details
All our investment Plans performed positively in November. Plans with a higher allocation to bonds, such as our Cautious and Tentative styles, performed particularly well. Plans that hold more shares, such as our Adventurous Investment Style, would have seen the growth in bonds and property smoothed by the flat performance of shares.
Our Investment Team continue to actively monitor the financial markets and their impact on your Plan, and as always, we are ready to act in your best interests to events as they unfold.
*Past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.