Good day. We’ve moved in to the last month of the year and the final countdown for the Festive season seems to have officially begun! November was a relatively positive month for most equities with the US and Asia markets up for the most part, while over in the UK and Europe, markets were slightly down. Last week kept to a similar trend, with the Hong Kong Hang Seng up 0.6%, the US S&P up 0.5%, and the UK FTSE down 0.7% on the week. With the US markets partly on holiday for Thanksgiving, we saw some focus return to the data as talks around the FED meeting later this month were quieter, along with the holiday. A majority of the data was in line with expectations showing slow, but positive growth in most sectors, with some slight increases in job numbers around the globe.
Given the lackluster power of data over the recent weeks, we’d be surprised to see the FED call for any tapering to QE3 at this time, but they’ve surprised us before, so we’ll have to wait and see what the outcome of the meeting mid month brings! The US economy has gone from a GDP of 1.5% earlier this year to 2.8% last quarter, but without strong improving job growth, these numbers won’t sustain the growth which is what we need it to do.
Over in the emerging markets, they seem to already have felt the impact of tapering even though it hasn’t happened, with most of the emerging markets remaining flat on the year with the exit of foreign capital. The question now though is whether we have seen a majority of the capital already leave. If it has, we should see a good foundation for the current levels in emerging markets but regardless of this, the emerging markets still make a strong case with much higher GDP numbers and less stimulus packages floating their markets. And with their potential for growth, the emerging regions still remain promising despite volatility which is likely to continue while the QE3 debates carry on.
The same goes for gold and other commodities as they continue to remain behind the equity markets. Although demand for some commodities has started to improve, the demand for gold remains under pressure leaving the precious metal near its low on the year. Inflation numbers are also coming in well below expectations, especially in the developed market, and without inflation concerns, gold will have to wait for more upside support before we see a rise in this asset. Despite this, this is one asset class that has seen the least amount of fundamental movements for the year and we all know that fundamentals have to return at some point. With this in mind, investors will want exposure to equities both in emerging and developed markets to continue with the ongoing growth we expect to see going forward, while also holding a variety of other asset classes in commodities and individual sectors to maintain a balanced and diversified approach.
For Austen Morris Associates’ investors – talk with your advisor about any repositioning to take advantage of markets at this time. For more information about Austen Morris Associates please visit our website.
Austen Morris Associates Wealth Management & Investment Team
Darren Cox
Co-Head of Portfolio Management
