Black November

Black November


René Julien, MBA, CFA

Director of investments

Black November

The month finished in a festive mood as the US celebrated its Thanksgiving and shoppers took advantage of the numerous bargains offered during Black Friday and Cyber Monday. This precursor to Christmas holiday spending is an important indicator of the mood of the US consumer and, thus, of the strength of the US economy. It may also be the catalyst to a year end Santa Rally. Unfortunately, this year’s Black November will sadly be remembered for the tragic events that took place in Paris on Friday the 13th. Our thoughts go out to all those who have lost loved ones.

Despite the sorrow, capital markets carried on. In the US, stronger than expected employment data pushed up the probability (above 70%) of the Fed’s first rate hike in December. Meanwhile in Europe, disappointing economic growth and low inflation numbers prompted Mario Draghi to comment that the ECB was prepared to use all its tools to stoke inflation, heightening expectations for further monetary stimulus in December. As expected, the yield on US 10 year bonds rose during the month, while the yield on German bonds moved in the opposite direction. Consequently, the EURO fell four cents during November to close at US$1.056.

More disappointing economic news out of China continued to weigh on commodity prices during the month, helping keep the lid on inflation. For one, the price of copper dropped by approximately 15% in November. Meanwhile, the price of a barrel of oil fell another $5.00 to finish at $45.00 (Brent), also helped by indications that oversupply conditions remain. As such, weak commodity prices continued to be one of the many reasons for the poor returns in emerging markets, which lost 2.69% on the month (in local currencies). Conversely, European stocks advanced during November, on expectations of additional ECB support, with the MSCI Europe index closing up 2.68%. The S&P 500 meanwhile, struggled to stay in positive territory, ending the month with a meager gain of 0.30%, as investors weighed positive economic growth against the prospect for higher interest rates.

Notwithstanding the mood of the consumer during this holiday season, and his willingness to spend, it is the mood of investors, in reaction to the Fed and ECB’s decisions that will drive market returns in December. Will Janet Yellen and Mr. Draghi be remembered for bringing joy to the markets, and fuel a Santa Rally, or will they be compared to the Grinch that stole Christmas? After a black November, a little bit of “joy to the world” would be welcomed to end the year. 

Happy Holidays to all !