Stock Market Wrap-up – November 2021

Australian Cash & Fixed Interest — Review

Short-term rates are once again unchanged, and the 90-day bank bill yield remains just above zero (currently 0.02%). Bond yields have risen significantly: The Reserve Bank of Australia, or RBA, had been trying to hold the three-year Commonwealth bond yield at 0.1% but has had to give way, and the yield has risen to just above 1% now from 0.15% at the end of August. The 10-year yield has risen by a similar amount over the same period, to 1.8% from 1.1%. The Australian dollar has been volatile in overall value – weak in September, strong in October, weaker again more recently – and has shown little net trend over the past three months. For the year to date, it is down 5.4% in overall value.


Australian & International Property — Review

The A-REITs have continued to perform well. The S&P / ASX200 A-REITs Index has made a capital gain of 14.8% and its total return including dividends of 17.8% has narrowly outperformed the 16.9% total return from the S&P / ASX 200.

Overseas REITs have also been strong. For the year to date, the FTSE EPRA/NAREIT Global Index in U.S. dollars has produced a 16.7% capital gain and has returned 20.1% including dividends, slightly behind the 21.8% total return from the MSCI World Index. The outcome continues to be heavily dependent on the U.S. market, which returned 34.9%: ex the U.S., the index was up by only 6.6%. The U.K. market also contributed, with a 20.8% return, but the Asia-Pacific region (1.7%) and the eurozone (0.6%) made little progress, while (as with the wider global share market) emerging markets were weak, with a loss of 7.5%.


Australasian Equities — Review

Australian shares have performed in tune with the globally equity-friendly environment of 2021, and the S&P / ASX200 Index has made a capital gain of 13.0% and has returned 16.9% including dividends. The biggest contributors have been sectors bouncing back from COVID-19 setbacks: The banks have taken a much smaller hit than at first feared, and the financials ex the A-REITs are up by 25.3%, while the return of previously pent-up household demand has been good for the consumer discretionary sector, which is up by 23.9%. The miners, however, have lost ground: Although commodity prices are still generally high by historical standards, the recent weakness of the iron-ore price has contributed to a year-to-date 3.7% capital loss.


International Fixed Interest — Review

This year’s global spike in inflation rates has proved to be a very uncongenial environment for bond yields, which have risen both as investors have looked for greater returns to compensate for higher inflation and as they have started to anticipate tighter monetary policy ahead. In the U.S., for example, the 10-year Treasury yield, at 1.58%, is up by almost 0.7% for the year, and there has been a similar increase in the U.K.; in the eurozone, the 10-year German government yield is up by 0.3%, though it is still in negative yield territory at negative 0.26%. The resultant capital losses mean that, for the year to date, the Bloomberg Global Aggregate Index in U.S. dollars is down by 4.4%, with government bonds losing 6.1% and corporate bonds 2.7%.


International Equities — Review

World shares have continued their recovery from September’s sell-off, and for the year to date, the MSCI World Index of developed markets in U.S. dollars is up by 19.8%. The American market has been strongest – the S&P 500 is up by 24.7% and the Nasdaq by 23.1% – but most other major markets have done well, with the FTSE Eurofirst 300 Index up 22.6% (in euros) and the U.K.’s FTSE 100 up 13.7% (in sterling). Japan remains the laggard: The Nikkei is up 7.9% in yen, but the yen’s weakness means Japanese shares are down 2.2% in U.S. dollars.

Emerging markets have struggled all year, and the MSCI Emerging Markets Index for the year to date is marginally lower (negative 0.4%) in U.S. dollars. Among the key BRIC (Brazil, Russia, India, China) markets the biggest influence on the weak overall asset-class outcome has been the Brazilian market, where the MSCI Brazil Index is down by 17.8%, but investors in Russia (MSCI Russia up 35.9%) and India (MSCI India up 28.5%) have done very well. China’s performance has been somewhere in the middle of these extremes of weak and strong performance, but exactly where continues to depend on which index you prefer to follow: The Shanghai Composite, for example, is up by 4.3% in U.S. dollars, whereas the MSCI China is down by 11.4%


Source: Morningstar Australasia Pty Ltd

Performance periods unless otherwise stated generally refer to periods ended November, 12 2021.