Monthly Market Update for November 2020

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Please find the next blog in our monthly series that provides a review of the prior month’s market data, the state of the economy, and the global financial markets.

Global Economy:

Global equity markets rallied in the month as investors cheered a barrage of positive COVID-19 vaccine news. Encouraging data around the safety and effectiveness of three different vaccines more than offset negative sentiment from the ongoing surge in the virus which continues to see record cases in both the US and abroad. Logistical challenges remain around production and distribution of the vaccines, but a firmer timeline is beginning to emerge for the defeat of the virus. Meanwhile pressure is mounting on Congress to pass further stimulus in the lame duck session, with the upcoming expiration of key CARES Act provisions set to kick millions off unemployment by year-end. Potential for bumps in the road linger with case counts soaring and congressional gridlock a threat to timely stimulus. Caution remains prudent, but investors can look for more certainty ahead as hope grows for a return to normalcy in 2021.

The Federal Open Market Committee met in November but did not change policy rates, a widely expected outcome. The meeting statement was little changed from September’s. Also in the month, the US Treasury opted not to extend several joint Fed/Treasury programs – the Main Street Lending Program, the Municipal Liquidity Facility, the two corporate credit facilities, and the Term Asset-Backed Securities Loan Facility – past year-end, prompting a rare rebuke from the Central Bank. After a rapid expansion, the Fed balance sheet has remained stable in recent months as strained financial conditions have eased, advancing modestly in November to a new high of $7.24 trillion.

The second estimate of 3Q-20 real GDP indicated the US GDP expanded at a record rate of +33.1% annualized, matching the first estimate. Upward revisions to residential and nonresidential investment and exports were offset by downward revisions to state and local government spending, private inventory investment, and personal consumption. Analysts expect growth to moderate in the 4th quarter, with estimates ranging from +2% to +11%.

More than 69 million US workers have filed initial unemployment claims since mid-March. Unemployment fell to 6.7%, but the labor market recovery has slowed as weekly new claims trended slightly upward in the month. In November, notable job gains occurred in transportation and warehousing, professional & business services, and health care, while losses occurred in the government and retail trade sectors. Core CPI fell slightly to +1.6% year-over-year, while the FOMC’s preferred measure, Core PCE, also fell to +1.4% year-over-year through October.

Global Markets:

All major equity indices posted strong returns in November, as equity markets responded positively to election results followed by several announcements of positive vaccine news to sustain the rally. The S&P 500 posted a robust 10.9% return to move to +14.0% YTD. Energy (+26.6%) was the top performing sector by far with Utilities (+0.3%) lagging. All other sectors ranged between +7% and +17% returns for the month. Small cap stocks, as represented by the Russell 2000, outperformed large caps with a +18.4% return. Energy (+29.5%) was again the leader while no sector posted a return below 10%. The Utilities sector (+10.4%) was the laggard. Value outperformed Growth across the market cap spectrum.

In the broad international developed markets, the MSCI EAFE index gained +15.5% with all sectors and countries positive for the month. Energy (+35.5%) and Financials (+22.9%) were the best performers, while Consumer Staples (+8.5%) was the laggard and only sector <10%. All developed countries were positive for the month with Austria (+32.1%), Spain (+29.5%), and Italy (+26.9%) the top performers and most others generally in the +10.0% to +20.0%range. Switzerland (+9.3%), Denmark (+9.6%) and Israel (+9.7%) had the lowest developed market performance.

Emerging market stocks, as represented by the MSCI Emerging Markets index, underperformed their developed market counterparts at +9.3%. Greece (+30.7%), Poland (+28.2%), and Hungary (+26.7%) were the best performers in the month. China was the laggard at +2.8% but remains among the leaders for YTD performance at +26.2%.

Real estate, as measured by the FTSE EPRA/NAREIT Developed index, performed in-line with equities with a +10.9%return. The energy-related Alerian MLP index outperformed other equities at +23.8%. The near-month NYMEX oil also rallied (+26.7%) but remains off by -25.8% year-to-date. Gold was negative in the risk-on environment with a -5.5% return. The diversified Bloomberg Commodity index was more modestly positive for the month at +3.5%, with precious metals weighing on returns but other sub-components generally positive.

US Treasury yields ended the month slightly lower and the curve flattened. Mid-month saw the 10-year Treasury yield reach its highest point since March before rates declined in the, latter half of the month as rising virus cases and renewed lockdowns seemed to caution fixed income investors more than those in the equity markets. The overall UST complex was positive for the month at +0.4%, with year-to-date returns at an impressive +8.3%. Sovereign yields outside of the US were mostly lower, and the global stock of negative yielding debt increased to $17.7 trillion from $16.5 trillion.

The BloomBar US Aggregate Bond index outperformed risk-free US Treasuries on both an absolute and duration-matched basis as credit spreads closed the month tighter. With a 1.0% return in November, the 12-month performance of +7.3%remains impressive given prevailing yield levels. IG corporate issuance remained high but solid 3Q earnings and the increased appetite for risk kept demand strong and helped spreads tighten by 21 bps. With tighter spreads across most categories and lower UST yields, the benchmark’s yield-to-worst fell 9 bps to just 1.15%.

The BloomBar 1-15-Year Municipal index outperformed US Treasuries, returning +1.1% in November. The exceptionally high issuance driven by election uncertainty in October was followed by November issuance of less than a quarter of October’s level. Demand remained strong, and the favorable supply/demand imbalance pushed tax-exempt yields lower in the month with a flattening curve. A split congress dims the prospects for stimulus aimed at state and local municipalities, but positive vaccine news still boosted investor sentiment.

The BloomBar US Corporate High Yield index returned +4.0% for the month, directionally consistent with higher-risk equities. Benchmark spreads were 96 bps wider on average, supported by falling supply and risk-on market sentiment. All-in yields fell significantly in the month from 5.78% to 4.70%. The trailing 12-month default rate trended slightly higher in November, with Energy contributing significantly to the default total. Bank loans continued to recover while emerging market bonds tracked other risk-assets with strong performance in the month.


The views expressed herein are those of Asset Consulting Group (ACG). They are subject to change at any time. This report was prepared by ACG for you at your request. Although the information presented herein has been obtained from and is based upon sources ACG believes to be reliable, no representation or warranty, express or implied, is made as to the accuracy or completeness of that information. Accordingly, ACG does not itself endorse or guarantee, and does not itself assume liability whatsoever for, the accuracy or reliability of any third party data or the financial information contained herein. Certain information herein constitutes forward-looking statements, which can be identified by the use of terms such as “may”, “will”, “expect”, “anticipate”, “project”, “estimate”, or any variations thereof. As a result of various uncertainties and actual events, including those discussed herein, actual results or performance of a particular investment strategy may differ materially from those reflected or contemplated in such forward-looking statements. As a result, you should not rely on such forward-looking statements in making investment decisions. ACG has no duty to update or amend such forward-looking statements. The information presented herein is for informational purposes only and is not intended as an offer to sell or the solicitation of an offer to purchase a security.

Please be aware that there are inherent limitations to all financial models, including Monte Carlo Simulations. Monte Carlo Simulations are a tool used to analyze a range of possible outcomes and assist in making educated asset allocation decisions. Monte Carlo Simulations cannot predict the future or eliminate investment risk. The output of the Monte Carlo Simulation is based on ACG’s capital market assumptions that are derived from proprietary models based upon well-recognized financial principles and reasonable estimates about relevant future market conditions. Capital market assumptions based on other models or different estimates may yield different results. ACG expressly disclaims any responsibility for (i) the accuracy of the simulated probability distributions or the assumptions used in deriving the probability distributions, (ii) any errors or omissions in computing or disseminating the probability distributions and (iii) and any reliance on or uses to which the probability distributions are put. The projections or other information generated by ACG regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Judgments and approximations are a necessary and integral part of constructing projected returns. Any estimate of what could have been an investment strategy’s performance is likely to differ from what the strategy would actually have yielded had it been in existence during the relevant period. The source and use of data and the arithmetic operations used for calculating projected returns may be incorrect, inappropriate, flawed or otherwise deficient.

Past performance is not indicative of future results. Given the inherent volatility of the securities markets, you should not assume that your investments will experience returns comparable to those shown in the analysis contained in this report. For example, market and economic conditions may change in the future producing materially different results than those shown included in the analysis contained in this report. Any comparison to an index is for comparative purposes only. An investment cannot be made directly into an index. Indices are unmanaged and do not reflect the deduction of advisory fees. This report is distributed with the understanding that it is not rendering accounting, legal or tax advice. Please consult your legal or tax advisor concerning such matters. No assurance can be given that the investment objectives described herein will be achieved and investment results may vary substantially on a quarterly, annual or other periodic basis. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.

Gryphon Financial Partners shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This was created for informational purposes only. Gryphon Financial Partners, LLC is an Investment Adviser.

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