Market index returns

Month to date since October 31, 2023 as of November 30, 2023

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.

• Will the Fed reserve judgement?: This week, U.S. Personal Consumption Expenditure (PCE) data was released. October’s figures were largely in line with consensus estimates – headline inflation was flat month-over-month and 3.0% year-on-year (assisted by falling energy prices), while core PCE (ex food and energy prices) rose just 0.2% for the month and 3.5% year-on-year. Simultaneously, personal spending growth slowed to 0.2% (down from 0.7% the month prior), and labor markets wobbled as continuing jobless claims increased 86k to 1.93 million – a 2-year high. Stabilizing inflation, as evidenced by the U.S. Federal Reserve’s (Fed’s) favorite gauge, combined with slowing economic growth and a cooling labor market could make for the goldilocks scenario required to sustain the current pause in rate hikes from policymakers and set the stage for cuts in early 2024. At the time of writing, futures markets (per the CME FedWatch Tool) are ascribing a ~79% probability of the Fed easing by May 2024.
• Falling for EU: While the Fed is likely to be sweet on inflation data out of the U.S., we imagine the European Central Bank (ECB) was absolutely smitten with the Eurozone’s annual headline inflation rate, which reportedly fell (head over heels, we assume) to 2.4% in November from 2.9% the month prior. The drop exceeded analysts’ expectations and cozied up to the central bank’s 2% target. Annualized core inflation figures (ex food and energy) also witnessed a decline from 4.2% to 3.6%. Thus far, with the holidays approaching, the ECB has been reluctant to commit (to cutting interest rates, of course), but with sharp moves like this, a change of course could prove irresistible by early spring.
• Our hot take on a big break: Last week, the Transportation Security Administration (TSA) broke its all-time record for people traveling through U.S. airports, recording nearly 3 million people in transit on a single day (November 26th). Such robust activity over the Thanksgiving holiday underscores that travel has finally exceeded pre-pandemic levels after coming to a near standstill, with demand expected to remain strong through the remainder of the holiday travel season. This is particularly great news for certain Real Assets sectors, such as hotels, transports, and energy – providing a welcome boost to demand trends and a solid fundamental investment case for these essential goods and services.
• A Quantum leap turns ma-Cobre: In other Real Assets news, we turn to the natural resources sector this week to discuss a major development in the metals space. On November 28th, the President of Panama directed Canadian mining company First Quantum to shutter its operations at a key mine called Cobre Panama. The directive was given after Panama’s Supreme Court determined that the contract between the Panamanian government and First Quantum (which had been granted a 20-year mining right with an optional extension) was unconstitutional. We’ll be monitoring further developments closely, particularly given potentially significant implications for both the Copper market (Cobre Panama had accounted for roughly 1.5% of the global copper supply) and for First Quantum (which had spent billions on the mining project and stands to forego additional billions in revenues). 

• New kid on the bloc: On Thursday, November 30th, OPEC+R held a summit where it invited a new member to join its ranks – Brazil. The move is transparently strategic, aimed at preserving its influence over the global oil supply as non-member countries account for an increasingly larger share of the crude oil pie. The bloc’s ability to exert control over Brazil, which has been producing massive amounts of oil, will strengthen its position as it’s hangin’ tough (with limited success thus far) to support the oil price in creative ways. Another round of voluntary cuts (~1 million bpd in new cuts and a continuation through Q1 2024 of previously announced cuts totaling 1.3 million bpd from well-incentivized Saudi Arabia and Russia) was met with a disappointing market reaction as the group failed to present a truly unified front. We will be watching developments here closely for signs of stress fractures and carefully monitoring these budding new friendships.
• Lights. Camera. EU Action!: This week, the EU Commission unveiled its “Action Plan for Grids” – a 14-point plan to support the buildout of its electricity networks…and with no time to spare. The Commission estimates that new investments of over €580B are required to effect ambitious upgrades by 2030, which will allow the integration of renewable energy sources. While far from perfect, the plan underscores the EU’s commitment to do more, addressing a perceived lack of urgency surrounding grid expansion, and identifying important areas of focus such as financing tools, supply chain standardization, and how to address and appropriately manage grid capacity issues. As we’ve mentioned in prior issues, the Energy Transition series is just getting started – stay tuned for more episodes.
• Beijing’s mixed bag: Investors also digested the latest manufacturing data out of China released on November 29th – October’s figure slumped further to 49.4, down from 49.5 in October (and below consensus forecasts), while non-manufacturing PMI also weakened to 50.2 (from a prior-month reading of 50.6), indicating that Beijing may need more fiscal policy firepower to steer its economy out of a sustained slump and stimulate flagging demand. Still, there are pockets of good news in the region. Off the back of better-than-expected Q3 GDP, business confidence indicators are beginning to suggest improvement, while Hong Kong exports also grew in October by 1.4% annualized, fueling optimism over recovering regional trade. The Politburo will have its work cut out in the months ahead, but it may yet forge a path out of the woods for the Chinese economy.
• Kiss today goodbye, point us toward tomorrow: As the world navigates a particularly sensitive and challenging geopolitical climate, we bid a final farewell and offer a nod to the late Henry Kissinger, who devoted a lifetime to diplomacy in pursuit of stability. Today, geopolitical risks and associated unpredictability abound, as evidenced by the tense interplay between the U.S. and China, the ongoing war in Ukraine, and the potential for escalation in the Middle East. For more food for thought on investing during these uncertain times, DWS’s CIO Office offers valuable insights , such as favoring broad diversification, including adding gold and alternative investments to a portfolio. In closing today, we hope to manifest a bit of calm by echoing the words of one of the greats: “There cannot be a crisis next week. My schedule is already full.”