Christmas came early for the capital markets this year. November proved to be an excellent month across multiple asset classes.
November Market Performance:
- Bonds:
- VAB – Canadian Aggregate Bond Index ETF: 4.1%
- VBU – US Aggregate Bond Index ETF: 3.9%
- VBG – Global ex-US Aggregate Bond Index ETF: 3.2%
- Equity:
- S&P500: 7.8%
- DOW: 8.9%
- TSX: 7.2%
- FTSE100: 1.5%
- NASDAQ: 9.4%
As has been the theme this year, the most important news story for November was the Consumer Price Index (CPI) reading in the Canada and the US coming in lower-than-expected. In Canada, CPI for October (released on November 21st) came in at 3.1%. This was down from the previous reading of 3.8% and was below market expectations of 3.2%. In the US, CPI reading for October (released on November 14th) came in at 3.2%. This was down from the previous reading of 3.7% and was below market expectations of 3.3%. A part of the lower readings stemmed from lower oil and gas prices.
These lower-than-expected CPI readings resulted in market bets that both the Bank of Canada and the Federal Reserve in the US are done raising interest rates and may even cut rates middle of next year. Based on this, equities gained, bond yields pulled back, and bond prices went up (remember bond yields and prices are inversely correlated).
Another vital piece of information published at the end of November was Canada’s Gross Domestic Product (GDP) growth rate for Q3 came in at -0.3%. This is the first negative reading since Q2 of 2021, and indicates our economy is slowing down at least in part due to higher interest rates working their way through the economy. This negative reading can be interpreted as yet another indicator the Bank of Canada may be done their rate hiking cycle.
All-in-all data readings in November turned out to be the catalyst the market needed to bounce back from the previous couple months.
