As Deutsche Bank’s Craig Nicol writes, it might not have felt like it given some of the big swings for assets intra-month, but compared to October, returns for assets during November were fairly tame by comparison. Indeed the overall picture was mixed in the end with 15 of the assets tracked by the German bank’s sample finishing with a positive total return in USD terms (out of 38) and 17 in local currency terms. That said, the YTD picture still remains fairly bleak with only 10 assets currently positing a positive total return in local currency terms, and just 5 assets in USD terms.
For the month of November specifically, concerns around many of the same issues which plagued markets during the year – namely Italy, the trade war and Brexit – remained a factor however a historic plunge in the price of Oil (just as Goldman was telling its clients to buy), which saw WTI (-22.0%) and Brent (-20.8%) easily finish bottom of the pack, added to the list. This was the worst month for WTI since October 2008 and the second worst month based on data back to the start of 2001.
Despite that risk assets were actually fairly resilient although the monthly return does hide sharper intra-month moves as noted earlier. For equities, Asia led the way with the Hang Seng (+6.2%) and Nikkei (+2.0%) two of the top performing markets in local currency terms. EM equities also returned a solid +4.1% while in the US the S&P 500 finished with a +2.0% return. The NASDAQ (+0.5%) did however underperform as tech stocks continue to lag. The picture in Europe was a lot more mixed with the STOXX 600 (-0.3%) and DAX (-1.7%) slightly down while the IBEX (+2.3%) and FTSE MIB (+0.9%) finished in positive territory – the latter seemingly supported by signs that the government might be softening its budget stance. It wasn’t all rosy for peripheral markets however with equity markets in Greece (-1.5%) and Portugal (-3.1%) lower.
For credit, November will likely be remembered as the month that spreads really started to leak wider as a combination of idiosyncratic issues and a catch up to broader market volatility weighed on the asset class. Europe once again underperformed the US with EUR HY and IG Non-Fin returning -2.0% and -0.6% respectively. US HY returned -0.5% and while that was a slight outperformance compared to Europe, HY did underperform US IG (-0.1%) and Senior (0.0%) and Sub (-0.4%) financials which in turn has trimmed some of the YTD outperformance.
For sovereign bond markets, with the exception of Gilts which returned -1.3% as concerns about the current Brexit deal passing UK Parliament weighed, Deutsche Bank notes that returns were solid but unspectacular and were helped by a more dovish Fed towards the end of the month. That helped EM bonds lead the way with a +3.2% return while BTPs returned +1.6% and Treasuries +0.9%. Bunds (+0.4%) also posted a small positive return.
As for the picture YTD, the drop for Oil in November has seen Brent (-5.6%) and WTI (-15.7%) now turn negative for the year, having held two of the top four places in DB’s leaderboard at the end of October. They’ve now been replaced by the MICEX (+19.6%) and Bovespa (+17.1%) – i.e. Russia and Brazil – in local currency terms, where the weaker respective currencies have certainly helped, given the much more modest +2.8% and +0.3% USD returns for the two markets. The NASDAQ (+7.3%) and S&P 500 (+5.1%) are two other markets to continue to hold positive total returns this year along with Bunds (+2.4%) and Spanish Bonds (+2.7%) – however USD returns are -3.5% and -3.1% respectively – while US HY continues to cling on with a +0.7% gain for the year. In contrast, European Banks (-19.0%), the Shanghai Comp (-19.8%) and Greek Athex (-20.2%) continue to languish at the bottom of our leaderboard. The broader STOXX 600 is now -5.1% and -10.5% in local and USD currency terms. With the exception of HY, US credit is down -0.5% to -1.8% while EUR credit is anywhere from +0.4% to -3.2%. In USD terms EUR credit is however down as much as -8.8% in total return terms.
Source: Deutsche Bank
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