hot air balloons in valley

Encouraging inflation news triggers blockbuster month for equity markets

Market Snapshot

19/12/2023
hot air balloons in valley

November was a blockbuster month for equity markets, after encouraging news on inflation in the US, UK and Europe, and consensus that the Fed will navigate a ‘Goldilocks’ soft landing’ situation. 

The S&P 500 was up nearly 9% for the month, reaching the top 20 (#17) of monthly gains for the index in the past 50 months!

 Dovish comments help Bonds to rally

Bonds also rallied as investors upped their bets on the rate hiking cycle being at an end, seemingly justified by dovish comments from European Central Bank (ECB) policymaker Isabel Schnabel, an influential voice in the conservative wing of policymakers, who suggested the ECB can take further rate increases off the table. In a sign of risk on euphoria, Bitcoin surpassed $40,000!

Oil prices fall as concerns over supply squeeze faded

It was a less positive month for oil, perhaps prophetically, as focus shifted to Dubai and the start of COP28. This price fall is despite OPEC+ announcing production cuts and suggests that investors are sceptical that these cuts will offset the increasing supply outside of the cartel and waning global demand. The price fall will be welcomed by President Biden, who is fighting low approval ratings, and prioritised lowering prices at the pump and wider inflation, as a key re-election pledge.

UK Stock updates

Turning to stocks, in a positive for UK small and mid-cap investors. Hotel Chocolat was purchased by Mars at a 280% premium to the market valuation! This highlights that there is value to be unlocked in this area of the market. 

This month also capped a remarkable recovery for Salesforce after a challenging 2022, which posted strong numbers and positive guidance, while Snap (parent company of Snapchat) and Pinterest, which have been tough names to run with over the past three years, appear to be on a more positive footing, and their 2023 recovery seems to have legs with a broker update recently.

Rest in peace Charlie Munger and Alistair Darling

We also heard of the sad passing of famed investor Charlie Munger the vice-chair at Berkshire Hathaway, just 34 days shy of what would have been his 100th birthday.

Munger’s mantra to ‘buy wonderful businesses at fair prices’ revolutionised investing and he is considered instrumental in turning Berkshire into the $780 billion investment powerhouse that it is today. Robust succession plans at the US conglomerate have been in place for some time, as Greg Abel and Ajit Jain prepare to take on additional responsibilities.

Closer to home, Alistair Darling, who orchestrated the £850 billion bailout for UK banks during the 2008 financial crisis as Chancellor, also passed away. Tributes were paid for his steady hand at such a challenging time across the political spectrum.

Written and prepared for Crowe Financial Planning UK Limited by John Moore (Senior Investment Manager at RBC Brewin Dolphin)

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