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Monthly Market Snapshot: November 2021

A monthly update on equity, fixed income, currency, and commodity markets.

Views expressed are those of the authors and are subject to change. Other teams may hold different views and make different investment decisions. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional or institutional investors only.

Equities

Global equities (-1.6%) declined but ended November with a 17.0% gain year to date. Markets were rattled by ballooning inflation, resurging COVID-19 cases in some countries, and the emergence of the Omicron variant. Uncertainty among health authorities about the nature of the new variant caused a sharp sell-off in equities, as investors grappled with the potential economic implications. Europe again became the epicenter of the pandemic, as the number of new COVID-19 cases accelerated by the most since the original onset of the virus. This prompted European governments to reintroduce restrictions and contemplate lockdowns to curb the spread of infections. Swelling energy prices, robust demand, and ongoing supply-chain disruptions continued to push inflation above forecasts, exacerbating pressure on central banks to curb their ultra-accommodative monetary policies and stimulus measures without choking off economic growth. Japanese Prime Minister Fumio Kishida announced a record ¥79 trillion (US$490 billion) stimulus package to shore up the recovery of the world’s third-largest economy

US

US equities (-0.7%) ended marginally lower. Stocks rallied early in November amid strong economic data, the passage of a bipartisan infrastructure package, and robust equity inflows. However, risk sentiment waned on inflation fears and anxiety about worsening COVID-19 trends and the Omicron variant. In October, inflation spiked to its highest level in 30 years, as the Consumer Price Index jumped 6.2% annually at the headline level and 4.6% at the core level, heightening scrutiny of the US Federal Reserve (Fed) amid concerns about a potential policy mistake. Markets were roiled after Fed Chair Jerome Powell signaled a faster tapering of the Fed’s asset purchase program, raising the specter of interest-rate hikes next year. President Joe Biden signed into law a roughly US$1 trillion infrastructure bill, which provides US$550 billion in new funding for transportation, broadband, and utilities. The US House of Representatives passed a social spending bill worth approximately US$1.75 trillion, advancing the bill to the Senate where it faces a stiffer challenge from moderate Democrats who, skeptical of its lofty price tag and expansive scope, could seek to pare back its provisions. Third-quarter earnings for companies in the S&P 500 Index grew 39% year over year, the third-highest growth rate since the second quarter of 2010.

Economic data released in November signaled that the US economy accelerated. The labor market strengthened in October, as nonfarm payrolls grew by 531,000, above forecasts of 450,000, following large upward revisions to payrolls for the previous two months. The unemployment rate dipped to 4.6%, while the labor force participation rate remained…

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