Monthly Commentary November 2023

Stocks were early to the Santa-rally this year, with most major indices delivering strong returns for the month. In the US, the S&P 500 and Nasdaq returned 9.1% and 10.8% respectively. Across the pond, London’s FTSE 100 returned 2.29% while further East Japan’s Nikkei 225 also had a strong month, returning 8.52%. The notable exception was Hong Kong’s Hang Seng Index, which closed the month marginally in the red. Positive returns were not limited to equities, as US Bond prices also staged a recovery during the month. The yield on 10- and 30-year government bond yields declined by 12.2% and 11.8% respectively, as traders bought up high-yielding bonds in a bet that interest rates will start falling sooner rather than later.

Much of the above performance can be attributed to US CPI numbers coming in slightly softer than expected, and the market again raising its hopes that a soft landing might indeed be possible. Worrying signs remain however, as large corporates, like Walmart, continued to send out profit warnings for Q4 and the first half of 2024. Concerns about the level of US debt also linger, and would have been one of the driving forces behind gold, which reached all-time highs early in December.

There were several significant world events over the last few weeks. Front and centre was probably Xi Jinping’s visit to the US for the first time in 6 years. A lot has changed since his previous meeting with Donald Trump at Mar-a-Lago. Both countries were looking to ease relations which have been tense in recent years, with Xi emphasizing that his country is not looking for a hot- or cold war with the US. After the largely positive summit, Biden confirmed that he still regards Xi to be a dictator, so they probably aren’t pen pals just yet.

On the topic of politics, the global resurgence of right-leaning politicians continues. This is clear from 2 elections this month. Both the Netherlands and Argentina’s elections led to resounding victories for politicians that some consider far-right, and follows similar results in in countries like Italy, Finland and Sweden.

On somewhat of a positive note, Israel-Gaza saw important breakthroughs, as a planned 4-day ceasefire was extended to 7 days, allowing for the release of 100’s of prisoners on both sides.

Local investors also enjoyed a very strong month. The JSE All Share Index returned 8.55%, while the resources and financials indices improved by 6.4% and 13.1% respectively. Some of these gains were eroded by the Rand, which weakened by 1.1% against the US Dollar.

Local business conditions remain dire, and November saw a return to high-level loadshedding. The government also continues doing its best to turn friends into enemies – this much is clear when looking at the Minister in the Presidency’s statement that the private sector is trying to collapse the country. This statement was, rightly, not received kindly by the business community.

Ironically, the local unemployment rate somehow again decreased, certainly in no small part thanks to the same private sector that is trying to make government’s job difficult…

James Hayward BEng (Civil)
Equity Analyst

James, or JD as he prefers to be known, is an equity analyst in the global investment team, having joined Flagship in 2021. At the completion of his degree, JD worked in the engineering and fintech start-up industries while pursuing further studies in investments. JD holds an Engineering degree from Stellenbosch University and has passed all 3 levels of the CFA exams.