Equities in developed markets extended their rally in November with major stock indexes reaching new highs. Markets were encouraged by reported progress on trade negotiations between the US and China. Economic reports suggested that US growth is stable. US equites, specifically small cap growth stocks, led the rally. Emerging markets, in contrast were virtually flat, and China A-shares delivered negative returns.
Major central banks, with the exception of China, left policies unchanged. At the IMF and World Bank annual meetings, officials indicated that monetary policy may have reached its limits and are considering greater use of fiscal policy as a tool to manage business cycles and support economic growth. Rising debt levels have supported global growth since the 2008 financial crisis. A decade of easy money left global debt at a record $250 trillion, increasing the global debt-to-GDP ratio to a record high of 320%.
Geopolitical and policy risks remain heightened. Brexit uncertainties persist in light of the upcoming general elections on December 12. Initial polls suggest that the conservative party could win the parliamentary majority by a significant margin. Prime Minister Boris Johnson has promised to reintroduce his Brexit deal to Parliament before Christmas. Following unrest in Hong Kong, President Trump signed two bills aiming to protect human rights of protesters. In Spain the Socialist Party failed to win the majority, requiring a coalition to form the government. Tension in the Middle East and Latin America added to market uncertainties.
Mercer's Monthly Market Monitor provides an overview of global financial markets.
In this issue we cover: