Market index returns

Market index returns Month to date since October 31, 2024 as of November 30, 2024:

Index definitions: Global Real Estate = FTSE EPRA/NAREIT Developed Index; Global Infrastructure = Dow Jones Brookfield Global Infrastructure Index; Natural Resource Equities = S&P Global Natural Resources Index; Commodity Futures = Bloomberg Commodity Index; TIPS = Barclays US TIPS Index; Global Equities = MSCI World Index; Real Assets Index = 30% FTSE EPRA/NAREIT Developed Index, 30% Dow Jones Brookfield Global Infrastructure Index; 15% S&P Global Natural Resources Index; 15% Bloomberg Commodity Index, 10% Barclays TIPS Index. Source: Bloomberg, DWS. Past performance is not indicative of future results. It is not possible to invest directly in an index.

Market commentary:

In November, global equity markets restarted their climb to a new summit after October’s performance pitstop. Investors sent stocks to new highs on the belief that the business environment and profitability in the U.S. will improve under the return of President Trump after his Presidential election victory over the Democratic ticket of Biden-then-Harris. European stocks were the exception as they landed in negative territory for the month while stocks in the Asia Pacific region managed to climb out of a mid-month hole to end in the green. In a sign of the strength of investor enthusiasm and momentum, U.S.-listed ETF inflows, a growing share of the investment market, hit a record in November. One risk to this holiday cheer is the height of the bar for 2025 as many Wall Street sell-side strategists have raised their stock market expectations for the upcoming year with price targets ranging from 6,500 – 7000 for the S&P 500 Index, which ended November at 6,032. The U.S. economy continued to surprise prognosticators as growth revisions were resilient versus sputtering growth engines in Europe and China.

For November, Global Infrastructure securities were the only segment of the Real Assets group to outperform broader equity markets on the back of strength in the midstream and utility sectors in the U.S. Global Real Estate Securities, U.S. Treasury Inflation-Protected Securities (TIPS), and Commodity Futures posted positive performance but trailed the broader equity markets.  Global Real Estate and TIPS benefitted from lower yields on the front-end of the curve while Commodity Futures were supported by strength in cocoa, coffee, and natural gas. Regionally, Global Real Estate securities performance was led by the U.S. (hotels and data centers), followed by Australia, while the rest of Asia Pacific (developers) and the UK (small cap niche names) weighed on performance. Lastly, Natural Resource Equities were weaker for the month, adding to negative performance year-to-date, with mining companies being a particularly heavy yoke on the sector.  

• Why it matters: With the U.S. presidential election behind us, markets turned its focus to the potential policy impacts on taxes, tariffs, and growth, as well as political turmoil in Europe. Policy implications can affect growth dynamics, interest rates, and currencies; all of which filter through corporate balance sheets and income statements. Corporate profit growth and cash flow discount rates (derived from risk-free rates and risk spreads), impact stock prices and market valuations. Hence forthcoming changes in policy must be closely watched as their impact on valuations will be quickly realized to either the upside or downside.  

• Macro Dive: This week, we discuss U.S. and global economic indicators that help provide insights into the job market, the health of economic growth, and inflation dynamics, which informs the view of the potential path for interest rates, corporate revenue growth, and ultimately investment valuations. Looking at the reasonable combination of employment and inflation data we believe that there is not enough evidence for the Fed to change its near-term easing bias nonetheless it may need to reconsider its terminal funds rate if recent trends continue.  

   

  • Chugging Alone: November’s nonfarm payroll employment rose to 227k, up from the weather & strike-impacted (revised) figure of 36k in the previous month and ahead of estimates. In support of consumer health and spending, the average hourly earnings rose 0.4% month-over-month and 4.0% year-over-year, both just a touch above estimates. Over the month, the gains were most pronounced in health care as well as leisure and hospitality, while retail trade lost jobs in the general merchandise segment. Within the transportation segment there was an increase of 32k jobs, reflecting workers returning after being on strike.^[1] 
  • Growth & Inflation: In the U.S., the latest inflation data (Core PCE for October), the measure favored by the Fed, came in at expectations of 2.8% year-over-year. This was a touch higher versus the previous month’s 2.7%. 3rd quarter GDP growth figures were also released, which came in at 2.8% annualized quarter-over-quarter. The increase was most pronounced in services such as health care (hospitals) and housing, while goods inflation fell on lower energy costs. In the EU GDP growth was 1.1% year-over-year, seasonally adjusted, with some of the strongest growth figures seen in Ireland, Poland, and Cyprus, while French data came in below expectations at 1.2% YoY and German growth hovered just above zero at 0.1% QoQ and YoY.^[2]
  • Reading the tea leaves: Leading S&P Global PMI indicators came in for November. Manufacturing PMI came in at 50.0, up from 49.4 in the previous month. The increase was primarily driven by emerging markets as the U.S. and Europe saw indicators weaken as they have remained in contraction. Service PMI’s also ticked up to 52.4, up from 52.3, again on EM strength while developed economy’s indicators weakened. In the U.S. Service PMI’s remained in expansionary territory (readings above 50), while Germany’s dipped into contractionary territory. Services represent a large and growing portion of economic activity, making this leading indicator an important one for decisionmakers to watch.^[3]

• Real Assets, Real Insights: In the following segment, we revisit Tech’s growing energy appetite, supportive data regarding the NYC office market, and potential innovation in lithium production.  

   

  • Filling the seats (Real Estate): Office space in New York City saw a swath of renewals and expansions across law firms, finance companies, and retail stores. 2024 is shaping up to be one of the strongest leasing demand years since 2019. While availability and absorption rates were negatively impacted during COVID, they have been trending better over the past year. For example, the availability rate for Manhattan was 16.7% in November, down 1.2% from 17.9% in the previous year.^[4]
  • Big Tech’s energetic appetite (Infrastructure): Meta Platforms Inc. (Facebook) announced plans for a request for a proposal to solicit developers to build one to four gigawatts of nuclear power in anticipation of future energy needs related to data centers. This stands in contrast to other co-location deals, such as Amazon.com’s, which would have taken capacity from existing power plants but was recently quashed by federal utility regulators. Meta’s plan also stands out for its size, which would be roughly 8X the size of the Alphabet’s Google deal to buy power from reactors built by Kairos Power LLC. The nuclear power plants will take nearly a decade to come on-line, requiring the use of existing coal and gas-fired plants and restarting mothballed plants to fill the gap. Facebook was one such customer in Louisiana as it was an anchor customer of a plant expansion. These projects are expected to also benefit energy transportation companies that will be needed to deliver the energy to where it is needed.^[5]  
  • Lithium sparks creativity (GNR/ Commodities): Chile’s government offered six new lithium deposits up for private sector development. The new slots will require innovations in extraction, including from geothermal deposits and clay. Existing projects have focused on brine deposits which are lakes under salt flats. Prospective bidders expressed interest in the areas, contributing to the government’s site selection. Chile follows Australia in lithium production, a key element in electric-vehicle production.^[6]