Global Markets

 

Global stock markets performed relatively well in November. Public data largely supports the view that central banks have reached the peak of the tightening cycle, which has also been a major boost to the positive performance of stocks and bonds over the past month. Major stock indices rose significantly this month, with the US S&P 500 rising 9.1%. The MSCI Emerging Markets Index rose by 8.0%, the MSCI Europe ex-UK Index rose by 6.9%, and the UK FTSE All-Share rose by 3.0%.

 

Government bond prices have also continued to rise, while yields dropped. As of the end of November, the yield of 10-year US Treasury bond fell from the 5% high in mid-October to just below 4.4%. US Treasury prices also rose by 3.5% in November. UK and German government bond prices rose by 3.1% and 2.5% respectively.

 

Commodity prices have retreated from their highs in October. The price of Brent crude oil reduced to $80 a barrel, partly due to the increased US supply and the failure of OPEC+ members to strictly comply with production quotas. Natural gas prices fell by 15% this month.

As of 30 November 2023:

UK 10 Year Gilt Yield 4.18%
US 10 Year Treasury Yield 4.33%
Germany 10 Year Bund Yield 2.45%

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UK Market

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In the Autumn Statement released on 22 November, the Chancellor announced that the National Insurance contributions for both employees and self-employed would be reduced, with a reformed and simplified system. The minimum wage would also be increased further, while long-term unemployed people would be provided with vocational training and job opportunities. These measures will further encourage work, ensure the supply of the labour market, and promote economic growth.

 

On the corporate side, the Chancellor announced that the temporary policy of "full expensing", which was originally scheduled to end in 2026, would become a permanent tax reduction measure. This means that if a company invests in qualifying machinery and equipment, it can be fully expensed in the year of expenditure. The government expects that this will release an additional £14 billion in investment in the foreseeable future. This will help UK businesses narrow the productivity gap, drive innovation, and promote sustainable growth.

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Ark Insights

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At the beginning of the year, UK Prime Minister Rishi Sunak set out three economic priorities for the year: to halve inflation, to promote economic growth, and to reduce debt. Consumer price index (CPI) measured inflation has now fallen from a peak of 11% last autumn to 4.6% in October 2023. The economy has also recovered from the pandemic faster than initially expected, with GDP growth exceeding expectations this year. Debt is expected to fall as a proportion of GDP from 2027-28. Under the various measures announced in the Autumn Statement, GDP is expected to increase by a further 0.3% in the medium term.

 

In such market sentiment, the Bank of England base rate, which was once widely expected to rise to 6.25% before the end of the year, has remained at 5.25%. Although the Bank of England has said it is not considering cutting rates in the short term, the likelihood of a further increase is also relatively low, which has been beneficial to fixed-income products and the discounts have gradually narrowed.

 

Currently, the UK is still in a high-interest environment, but the interest rates of most business accounts in the market are still at a relatively low level. We provide cash management solutions for small and medium-sized businesses in the UK. Please contact your advisor for more information.

 

As always, our Investor Relations team would be more than happy to help you with any queries.

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The views expressed in this update are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument. The views reflect the views of Ark Investment Management at the date of this document and, whilst the opinions stated are honestly held, they are not guaranteed and should not be relied upon and may be subject to change without notice. Investments entail risks. Past performance is not necessarily a guide to future performance. There is no guarantee that you will recover the amount of your original investment. The information contained in this update does not constitute investment advice and should not be used as the basis of any investment decision. Any references to specific securities or indices are included for the purposes of illustration only and should not be construed as a recommendation to either buy or sell these securities or invest in a particular sector. If you are in any doubt, please speak to us or your financial adviser as appropriate.

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