Market Commentary

Risk appetite prevailed once again in November as investors embraced some favourable developments on the trade, political, and global growth fronts. Of note, investors welcomed news of progress towards a “phase one” trade deal and even the possibility of a rollback in existing tariffs. Meanwhile, the latest polls revealed that PM Boris Johnson is expected to secure a stable majority at the December elections - which would ultimately remove the immediate threat of a no-deal Brexit. Finally, there was some good news on the state of the global economy, where the outlook has brightened and economic indicators appear to be firming in an encouraging sign that the worst of the factory-driven downturn may be behind us. 

December 2019

The risk-on mood permeated through global equity markets in November, with the MSCI All Country World advancing for a third straight month. Regionally speaking, North American bourses led the global charge, with both the S&P 500 and S&P/TSX breaching all-time highs several times throughout the month. Looking abroad, European and Japanese stocks also eked out some marginal gains, while in contrast, emerging market stocks bucked the global trend and posted their first monthly drop since August as uncertainty over US-China relations following building tensions in Hong Kong clouded the outlook for riskier assets in the developing world. 

Government bond yields traded in a tight range throughout November and ended the month modestly higher. The biggest upward move took place at the short-end of the curve as the Federal Reserve converged towards a neutral policy stance after cutting rates three times in 2019, while the Bank of Canada expressed its confidence in the resilience of the economy and its reluctance to reduce interest rates at this time. The upward move in the long-end did not match that of the short-end and yield curves flattened modestly during the month. 

In currency markets, the US dollar maintained some positive momentum and advanced broadly versus its G10 peers. The yen was the worst performing currency as unrelenting appetite for risk curbed the appeal of the safe haven currency. The euro headed for its biggest monthly slide since July even in the wake of economic and inflation results that surprised to the upside, while the Canadian dollar also lost some ground versus the dollar and posted its biggest monthly loss since May. 

Finally in the commodity space, gold extended a retreat from September’s six-year high and capped its worst month since 2016 amid optimism that US-Sino negotiators are edging closer towards an interim trade deal, while the strengthening US dollar also weighed. Oil capped a monthly gain in the environment of thriving appetite for risky assets - though pared some of those gains at month-end on signals that OPEC and its allies may be averse to deepening output cuts when they meet in early December. Copper rose for a third month as the improved tone to trade deliberations bolstered the demand outlook for the red metal, while depleted stockpiles also lent support.