November was a good month for equities after they’ve been in red for three consecutive months. The fund was up 7.14%* underperforming the MSCI World Index which was up 9.41%. The tech companies continued leading the way in terms of performance. The equities rally was also accompanied by U.S. bonds rallying as well. The U.S. 10-treasury yield came off from 4.74% to 4.32% for the month, and the 2-year treasury yield came off from 5.09% to 4.68%- bond prices and yields are inversely related.
The U.S. Federal Reserve left rates unchanged at their November meeting, holding interest rates steady at 5.25%- 5.5%. The U.S. economy has shown strong resilience as consumer spending grew at its fastest pace since 2021 and the labour market remaining strong. Chairperson, Jerome Powell, mentioned that they underestimated the strength of small businesses and households balance sheets and that pre-pandemic saving levels will only be reached further out. The upcoming December meeting will be an important one as some market participants expect the Fed to hike rates one final time, as the Fed has left the door open as to what’s the best policy to bring inflation down to 2% over time.
In terms of economic data, Europe’s inflation fell from 2.9% in October to 2.4% for November, its lowest in over 2 years. This number is closer to the European Central Bank (ECB) inflation target of 2%. Core inflation, which excludes food and fuel prices, fell from 4.2% in October to 3.6% for the month. These inflation numbers have resulted in an increase in market expectations that the ECB will leave rates unchanged at their next December meeting. China’s inflation came in weaker than what the market was expecting with inflation falling 0.5% y/y in November after falling 0.2% in October. PPI (producer price index) declined 3% y/y in November after declining by 2.6% in October, this is the 14th consecutive month of PPI falling and it’s the quickest rate since August.
In terms of the fund, the best performers for the month were Crowdstrike (34%), Ferrari (19%) and Straumann Holding (17.6%). The cybersecurity company Crowdstrike reported strong Q3 FY24 results with their annual recurring revenue growing by 35% y/y to $3.15bn. Their revenue for Q3 grew by 35% to $786m. Management revised their FY24 guidance (ending Jan. 2024) upwards due to their strong growth numbers. Ferrari reported solid Q3 results as well with their order book remaining at its highest levels. Net revenues up 24% to €1.5bn while net profit up 46% to €332m due to positive product mix and an increase in personalisation of their product. Due to their strong results, management revised their FY23 guidance upwards which boosted their share price.
December is seasonally one of the best performing months during the year for the equity markets, we’ve already started seeing positive performance for the month. The fund has increased equity allocation after being underweight for months. There’s still critical data to watch out for which will inform the central banks about how to address inflation which will have an impact on market performance.
All returns are in USD