November was another good month for stocks with a number of major indexes posting solid gains.
Chinese stocks were the highlight of the month, delivering outstanding returns. However, returns from European and US equities were also good. The best-performing sectors were materials, industrials, and financials, while utilities and real estate also performed well.
One area of the market that enjoyed a major rebound in November was semiconductors.
Here, sentiment was boosted by news that Warren Buffett had bought more than $4 billion worth of Taiwan Semiconductor Manufacturing Co. Company Limited stock in the third quarter of 2022. This boosted other chip stocks such as Nvidia, AMD, and ASML, which all posted double-digit gains for the month.
Among other areas that experienced a major rebound were Chinese tech stocks.
These stocks rose on the back of talk about China’s reopening, new COVID-19 measures, signs that Beijing’s crackdown on tech companies may be easing, and a meeting between US President Joe Biden and Chinese President Xi Jinping — which signalled a possible warming of relations between the two global superpowers. In the latter half of November, protests in China slowed the rally here, however, the likes of Tencent, Alibaba, and JD.com all finished the month up substantially. The talk of China reopening also boosted other Asian markets such as Hong Kong and Taiwan.
Lower-than-expected inflation was one factor that helped stock prices in November.
In the US, inflation came in at 7.7% for October, down from 8.2% in September, indicating that inflation may have peaked. This led to a major stock market rally, with the Nasdaq closing up more than 7% on the day. The inflation numbers also led to a decline in the US dollar, with the euro, British pound, and Japanese yen all strengthening against the greenback.
However, central banks continued to increase interest rates in an effort to control inflation. The US Federal Reserve hiked rates 75 basis points to a range of 3.75%–4.0% while the Bank of England raised rates from 2.25% to 3.0% — its largest hike in 33 years. Looking ahead, the Fed is set to keep increasing rates, however, investors generally expect to see smaller rate hikes from here due to the Fed’s “data dependent” approach. Late in the month, Fed Chair Jerome Powell signalled that the central bank is ready to slow its pace of rate hikes, propelling stocks higher.
“Cutting rates is not something we want to do soon. So that’s why we’re slowing down, and going to try to find our way to what that right level is.”
Fed Chair Jerome PowellQuoted by the NewYork Times, Nov. 30, 2022
Elizabeth Frantz/Reuters, The NewYork Times
The European Central Bank may also slow its pace of tightening and only increase rates by 50 basis points in December. Talk of smaller rate hikes in Europe also served to boost European equities.
Despite the high level of inflation, consumers continued to spend money.
Black Friday sales came in at a record $9.1 billion while Cyber Monday sales hit a record $11.3 billion. This supported online shopping stocks.
Turning to commodities, it was a poor month for oil, which fell around 9% on the back of concerns in relation to lower demand. It is worth noting, however, that oil stocks generally held up relatively well in November due to the strong cash flows being generated in the sector right now. Gold rose to around $1,750 an ounce, boosting gold miners, while other commodities such as copper and nickel also did well.
In the crypto space, volatility was high in November.
The main driver of the volatility was news that Sam Bankman-Fried’s cryptocurrency exchange FTX had filed for bankruptcy. This sent shockwaves through the crypto world and prompted more calls for regulation. Bitcoin ended the month near $17,000, down just under 16%.
Other major developments in November included the COP27 climate change conference in Egypt and the World Cup in Qatar. The former ended with a historic deal to create a fund designed to pay poorer nations for the harm caused by climate change, while the latter was watched by around half of the world’s population.