In November, US equities, as represented by the Russell 3000, emerged as the top-performing asset class, achieving a commendable total return of 2.4%. Not far behind were US real estate investment trusts (REITs), which saw a notable 2.0% increase, building on October’s impressive 10.0% rise according to the MSCI REIT Index. Foreign stock markets in developed regions, represented by the MSCI EAFE, claimed the third spot with a respectable 1.4% total return. Despite various macroeconomic challenges confronting Europe and Japan, these pressures seemed to ease in November, at least in terms of equity performance overall.
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● German manufacturing PMI was revised down to 49.5 for November | Investing.com
● Eurozone manufacturing shows signs of near-stagnation as major economies contract | Guardian
● Italy’s manufacturing sector contracts once more | RTT
● Federal Reserve unsettled by stubborn inflation, though hesitant to raise alarms | Reuters
● Black Friday shopping declines by 11% | Time
● Oil experiences further significant losses, with the outlook remaining uncertain | Marketwatch
● Brandes on Value: The Independent Investor
By Charles Brandes
Review via Reading The Markets
In “Brandes on Value: The Independent Investor” (McGraw-Hill), Charles H. Brandes celebrates the practicality and universal application of Graham-and-Dodd principles. His journey into value investing began unexpectedly when an unassuming elderly man walked into his brokerage office in 1971. This man was Benjamin Graham, who wanted to open an account to buy a stock he had been monitoring. Their ensuing discussions led Brandes to become a dedicated value investor. In 1974, despite an unstable economic climate, he established his own firm, convinced that value investing fundamentals are immensely beneficial for long-term investors. (p. xiv)
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The Federal Reserve is poised to consider raising interest rates next year for the first time in almost a decade, yet current concerns are centered around the risk of deflation. This is reflected in a notable decline in the market’s inflation forecast, illustrated by a closely monitored yield spread in Treasuries. The implied inflation outlook dropped to a three-year low of 1.82% on November 26, based on the difference between nominal 10-year yields and their inflation-indexed counterparts. This marks a significant decrease from the recent high of 2.29% seen on July 30. It remains uncertain how much of this deflation concern is linked to macroeconomic worries in Europe and Asia in contrast to the US. However, it is increasingly evident that if the market continues to lower its inflation projections, it will be harder to assert that the US economy is insulated from global macroeconomic issues.
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● German retail sales experienced their highest increase in three and a half years | RTT
● EMU inflation returns to a five-year low amid declining oil prices | Euro Insight
● Saudi Arabia blocks an OPEC output reduction, leading to a plunge in oil prices | Reuters
● France’s consumer spending sees its largest drop in nine months as unemployment reaches record highs | RTT
● Signs of improvement in the Eurozone as a weaker euro begins to take effect | Fortune
The celebration of Thanksgiving on the fourth Thursday of November holds deep cultural significance in the United States, yet the historical origins of this event are surprisingly sparse in terms of documentation. According to historian Robert Tracy McKenzie, “the only surviving first-hand account of a celebration in 1621 comes from the pen of Edward Winslow.” This concise account, detailed in The First Thanksgiving
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Personal income and spending showed modest increases in the October update from the US Bureau of Economic Analysis (BEA), recording monthly growth rates of +0.2% for both metrics. These figures fell short of widespread expectations. While analysts often scrutinize monthly changes for context, it is essential to focus on the annual trends, particularly private-sector wages, which continue to grow steadily at approximately 5%.
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Clarity regarding the business cycle is often regarded as a virtue, albeit a rare one. The US economy stands out in this regard, according to Scott Sumner, an economist from Bentley University and a well-known macroeconomic commentator. He notes, “The US has a really weird economy. All our recessions are 100% clear-cut. Either we have a recession or we don’t. Normal countries have borderline recessions. Not us.” However, Sumner suggests that this unique quality may soon change, warning that we might encounter situations where recessions will become debatable. If his predictions hold true, the analysis of macroeconomic trends will become increasingly challenging.
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● US GDP shows better-than-expected growth of 3.9% in the third quarter | LA Times
● UK GDP growth confirmed at 0.7% for Q3 | Marketwatch
● Bank of England plans to raise rates despite gloomy outlook in the eurozone, according to Mark Carney | Telegraph
● Saudi Arabia indicates no intention to cut oil production as the market is expected to stabilize on its own | Reuters
● Unexpected rise in consumer confidence in France | MNI
● Continued decline in Italy’s consumer confidence | Marketwatch
● The US (mostly) benefits from a strong dollar | Bloomberg
● Emerging market portfolio inflows rebound in November | IIF
US personal consumption spending for October is expected to rise by 0.3% compared to the previous month in the upcoming update (November 26), based on a median forecast derived from multiple econometric estimates. This prediction signals a moderate recovery in growth relative to September’s decline of 0.2%.
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Conclusion: The financial landscape remains dynamic, with shifts in economic indicators and asset performance reflecting global trends. Whether addressing inflation concerns or observing variations in consumer behavior, it’s important to stay informed about these developments to navigate the complexities of the current economic climate.