Stocks and bonds jumped in early November, thanks to signs of falling inflation in developed markets. The hope is that we have passed the high watermark of interest rate expectations, and central banks could start considering interest rate cuts. The key 10-year US Treasury yield dropped from a peak of 5% in mid-October to 4.2% in early December.


Inflation dropped sharply from 6.7% to 4.6%, its lowest level for two years, but still twice as high as the Bank of England’s target. Core inflation, which strips out volatile food and energy components, also dropped but remains high at 5.7%. Governor Andrew Bailey struck a cautious note, saying that inflation’s trajectory was uncertain and rates need to remain around the current level for an extended period.

The chancellor found room for some tax cuts in the autumn statement. The most eye-catching was the cut to National Insurance, but for the UK’s long-run growth prospects the most positive change was the indefinite extension of corporate tax relief for property and plant investment. The scheme incentivises companies to spend on factories and technology, and should ultimately drive up productivity. Our suite of UK funds should provide full exposure to productivity improvements up and down the market-cap spectrum.


US Q3 GDP growth was revised up to a blistering +5.2% annualised rate, reflecting red-hot consumer demand, albeit stoked by rampant government spending. US inflation dropped sharply from 4.8% to 3.2%. However, leading indicators like payrolls and wage data suggested inflationary pressures persist. While the data was positive for US stocks, it also weakened the dollar. Our Xtrackers S&P 500 fund uses hedging to remove the currency effect, helping make it the top performer of the month, rising 9%.

Investing legend Charlie Munger died in California, five weeks before his 100th birthday. Munger was known for his pithy wisdom and investment philosophy of “buying great companies at fair prices”. He was vice-chair of Berkshire Hathaway, the investing conglomerate run by his business partner Warren Buffett. Berkshire Hathaway stock returned 3.8 million per cent in the 58 years to 2022, trouncing the wider stock market. Berkshire remains a top-10 holding in both our core large-cap US funds.


The Eurozone saw its inflation rate drop to 2.4%, close to its target. The fall was driven by lower energy prices, but goods and services inflation also dropped. European industrial activity remain depressed, mainly due to poor data from Germany and France. In our Ethical portfolios, our Liontrust Europe fund surged 11% thanks to its growth tilt.


There was wide dispersion among emerging markets. Those with heavy links to the Chinese economy struggled. Latin America was the bright spot, boosted by booming US consumer demand and the post-election certainty in Argentina. Our new Latin America fund was the full beneficiary of this, gaining over 8% in the month.

China had a tough month. The rating agency Moody’s cut its outlook on China’s credit rating to negative, citing the risk of persistently lower economic growth and the overhang from a crisis in the cash-starved property sector. The trouble has spread to local governments; many relied on a buoyant property sector to top-up their coffers by selling off state land, and now require central government help to remain solvent.


The yen strengthened to its highest level in three months, on hopes the Bank of Japan will modify its yield control policy if inflation stays elevated. In local-currency terms Japan continued to be the year’s top performer, up 5% in November and 29% year-to-date. Overseas investors got closer to 10% due to currency headwinds.


Bears went into hibernation in November, and bulls charged ahead, fuelled by a spate of data showing inflation dropping across the West. After a bruising two years, investors can be optimistic that the worst of the turmoil is behind. But the delicate balance between bringing down inflation and avoiding recession is not complete. Investors should stay alert for polar bears this winter.