Equities extended their recovery from the prior month Brexit shock (MSCI AC World +4.2%), supported by strong US employment, better than expected corporate results while central banks globally signalled a willingness to remain accommodative in the wake of the UK vote. Equity market gains were broad based across regions, with sector gains led by Technology, Biotechnology, Telecom, Commodity-sensitive and small cap. The S&P500 rose to a record high, shrugging off some renewed appreciation of the dollar after the UK vote. Emerging equities were supported by improving macro-economic and political trends in the EM region: reduced fears about China’s growth, positive sentiment about India, and a stabilising political landscape in Latin America. Global bond yields reached record lows as investors anticipated further monetary policy stimulus to mitigate the risks of the Brexit. Ten-year U.S. Treasury yields briefly touched 1.32%. US high yield benefitted from investors fleeing Europe and in search of higher absolute yields. The Emerging debt rallied this month, benefitting from record inflows supported by improving fundamentals in the region and the search for yield. Commodities were mixed with gains across Metal led by Platinum, Silver and Gold, while Energy & Agricultural commodities declined.
NOVACAP Asset Management
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