The Cambridge Weekly – 11th December 2023

The Cambridge Weekly – 1th December 2023

A bit of a downer

We review November’s cheery asset performance below. Early December is also currently on a positive track and trading volumes have been higher than November’s averages generally, suggesting quite a bit of capital is being put to work by investors.

Global bond yields have fallen yet again (meaning bond prices have risen). This has been driven by a round of some indications of weaker employment data in the US, and soft (but not awful) purchasing manager survey indices, combined with dovish noises especially from members of the European Central Bank (ECB).

November review

What a difference a few weeks make. In a complete turnaround from October, November was all smiles for international investors. Capital market returns were positive across virtually all regions, and in many cases massively so. As autumn ended, fears over prolonged inflation and interest rates staying higher for longer seemed to dwindle with the daylight. A perceived softening from central banks preceded a significant rally in global bond prices. The sinking of bond yields – the inverse of prices – lowered the so-called ‘risk-free’ rate of return, and made stocks look much more attractive by comparison. The table below shows November’s returns across key regions and asset classes.

Xi goes to America

During last month’s rally in global stock prices, only one major economy did not partake in the spoils: China. Both of China’s benchmark stock indices – the CSI 300 and the Hang Seng – are down by more than 6% over the last month in local currency terms. It was the continuation of a miserable year in Chinese markets, where economic and policy disappointments have been the defining feature. At the time of writing, the CSI is down 12.5% year-to-date in renminbi terms, while the Hang Seng has dropped a painful 18.3%.