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What happened in the markets
November saw volatility across global markets and shifting expectations for central bank policies. Diversification was the best strategy to follow.
Healthcare was the standout sector for global equities during November, up 9% in the US. Several larger companies posted positive trial findings and better third-quarter results than expected. This was backed up by Communication Services up 6% (helped by a good return from mega weight Alphabet, which is now the world’s 3rd most valuable company, and proving a winner in the AI space), and the defensive sector Consumer Staples, up 4%. These returns offset a pause in the IT sector, which after six months of charging along fell around 4% during November. There were concerns about AI-linked valuations and the levels of economic growth in Europe and Asia.
Global bond markets were mixed in November. US corporate credit performed well, but spreads widened versus Treasuries. The Treasury yield curve steepened as yields in shorter maturities fell while the long-end remained stable upon consensus the central banks are nearing the end of the rate reductions.
Domestically the Reserve Bank continued cutting the OCR, down another 0.25% to 2.25%. Indications were signalled that we could be now closer to the bottom and the next cut may not be until early 2026. These indications were not taken too positively by the share market, which fell 0.4% during the month. Across the ditch the Australian share market was even worse, down almost 3%.
What happened with our Portfolios
While the month of November saw volatile markets and prices, the returns for the models were relatively flat. Small gains from the global assets was offset from small losses in the domestic assets.
Year to date the strong run in global equities from May to October has meant the more aggressive models, ie 100/0 and 80/20 are up around 15%. Even the conservative models such as the 30/70 and 40/60 are up around 7%. This is around 3-4% above current term deposit rates.
There have been no changes to the portfolios underlying holdings over the quarter.
