Monthly Report November 2024 - Analysis & Investment Strategy

Market Analysis – November 2024

November presented a dynamic and contrasting environment for financial markets, marked by geopolitical events, key monetary decisions, and divergent macroeconomic signals between the United States and Europe.

US and European Equities:

In the United States, equities showed robust performance in November, reflecting a renewed sense of investor confidence. The S&P 500 surpassed the symbolic 6,000-point threshold (+2.2% for the month), driven by strength in the technology and consumer goods sectors. This momentum was fueled by solid macroeconomic data, including resilient employment figures and easing inflation. The Nasdaq rose by 2.8%, supported by gains in artificial intelligence and semiconductor companies, while the Dow Jones posted a more modest performance (+0.9%) due to disappointing results in the industrial sector.

A key event in November was the electoral victory of Donald Trump, which bolstered market enthusiasm. Investors anticipate that his pro-business policies, such as further tax cuts and deregulation, will provide additional support to the U.S. economy. This outlook particularly energized industrial and energy stocks, sectors expected to benefit directly from these measures. While the short-term economic outlook appears promising, some analysts remain cautious about challenges tied to rising public debt and potential geopolitical or trade tensions.

In Europe, equity markets displayed greater volatility, primarily influenced by political uncertainties and a sluggish economic backdrop. The CAC 40 in France lost 1.3%, weighed down by political tensions related to a government reshuffle and growing concerns over the health of the real estate market. The DAX in Germany was flat (+0.1%), as the manufacturing sector remained fragile despite tentative signs of stabilization. Weak domestic demand and persistently high energy costs continue to dampen the region’s economic prospects.

Interest Rates:

Central banks remained a focal point of attention. In the United States, the Federal Reserve held rates steady, signaling a cautious approach amid signs of a gradual economic slowdown. Markets anticipate the first rate cut in early 2025, although this will depend on upcoming economic data.

In Europe, the European Central Bank adopted a similarly cautious stance. Despite lingering inflationary pressures, particularly in the services sector, weak growth prospects deterred further rate hikes. This position reflects the persistent challenges facing the Eurozone, including a banking sector beginning to feel the effects of rising rates on loan portfolios.

Bonds:

Bond markets extended their rally in November, buoyed by expectations of less restrictive monetary policies. In the United States, 10-year Treasury yields fell to 4.1% from 4.4% the previous month, as investors anticipated monetary easing in 2025. In Europe, 10-year German bond yields followed a similar path, closing at 2.3%. However, sovereign bonds in peripheral European countries faced increased pressure, reflecting concerns over their solvency in the event of a prolonged recession.

Geopolitics:

The region experienced significant geopolitical developments. A ceasefire between Israel and Hezbollah marked a historic moment, temporarily easing tensions along the Lebanon-Israel border. Meanwhile, the region saw an escalation in violence between Israel and Gaza, exacerbating international tensions. Iran intensified its nuclear program, drawing strong reactions from Western powers and heightened diplomatic pressure. Talks between Saudi Arabia and Yemen stalled, dampening hopes for stabilization. Finally, OPEC+ maintained its production quotas despite calls for an increase, reflecting a cautious strategy amid global uncertainties.

Commodities:

Oil prices recorded a notable correction in November, with Brent crude ending the month at $84 per barrel (-6%). This decline was attributed to weak demand prospects in China and stable production levels in major producing nations. Natural gas prices also fell, driven by a milder-than-expected start to winter in Europe.

In contrast, gold rose by 1.7% to $2,640 per ounce, supported by increased demand for safe-haven assets amid persistent economic and geopolitical uncertainties.

Conclusion and Investment Strategy: November 2024 highlighted the notable resilience of U.S. equities, in stark contrast to the challenges faced in Europe. A shift toward more accommodative monetary policies is expected to support risk assets in the medium term, although risks tied to real estate and corporate debt remain elevated.

A diversified approach remains essential in this environment, with a focus on defensive sectors and close attention to opportunities in commodities and long-term sovereign bonds. Political uncertainty in Europe, however, could heighten market volatility in the coming months.