From US Gains to SA Pains: November's Market Movers

November's market movements revolved around the US election results. Learn how Trump's policies, global interest rate cuts, and emerging market challenges are influencing investment trends. 

Global Markets
The US election results were the biggest driver of investment markets in November. Donald Trump managed to secure the Presidency, while the republican party managed to secure the majority in the Senate and House of Representatives (the two legislative bodies in America). What this means is that it will be difficult for Democrats to oppose any legislation that Trump introduces over the next two years – When the composition of the Senate and House will change again. Furthermore, within the Republican Party, President Donald Trump has far more support than in his previous term.  

Chart 1: 2020 vs 2024 US Election Results (Source: Al Jazeera)


 
As one would expect, US markets had a good month – up 6.3%. Trump is expected to positively impact US investment markets based on several policies implemented during his previous tenure including corporate tax cuts, deregulation, increased spending and renegotiation of trade agreements. In contrast, European equities ended the month down 1.7% and Emerging Markets ended the month down 3.6%, as certain countries in these regions are expected to face the brunt of the fresh tariffs. The US dollar strengthened significantly in November as Trumps “deglobalization” policies are seen to be inflationary, and potentially limit the magnitude of the Fed’s rate cutting cycle.

Chart 2: US Dollar index (Source: Trading Economics)

 Developed market central banks continued to cut interest rates in November. The US Fed cut rate by 0.25% after their aggressive rate cut of 0.50% in September. The Bank of England cut rates by 0.25% and signalled for four interest rate cuts in 2025 if inflation cools. European bonds rallied in November (up 2.4%); however, US bonds did not move to the same degree (up only 0.8%) as Trumps policies are expected inflationary. Markets are now expecting the Fed to cut rates once per quarter in 2025 compared to previous expectations for 25 bp cut every meeting.

Local Markets
Local equities fell to 1.02% in ZAR during the month of November as foreign investors rotated back into the US stock market. The BRICS nations were brought to the spotlight after Trump threatened to impose 100% tariffs on the bloc if they were to create a rival currency to the US dollar. The Financials Index ended the month up 0.33%, while the Industrial Index ended the month up 0.02%. The Resources Index ended the month down 6.25%.

The South African Reserve Bank cut interest rates by 0.25% in November. Many South Africans were hoping for a 0.5% cut given that our inflation rate is well below 6%- in fact, it is currently below the SARBS lower band of 3% (see Chart 4). Unfortunately, the Reserve bank must consider the stronger dollar cycle that we find ourselves in. If our rate cuts are too aggressive, it will lead to an exodus of capital and put further strain on the rand.

Chart 3: SA Repo Rate (Source: Trading Economics)
 

Chart 4: SA Inflation (Source: Trading Economics)

Chief Investment Officer, Duane Gilbert’s Commentary
Our market outlook for 2025 remains bullish. Falling interest rates (globally) in a non-recessionary environment will be supportive of equity markets. Bond yields remain under pressure as investors rotate their portfolios into equities.

The US remains our destination of choice – growth stocks and small caps in particular. Growth rates in Europe, China and Japan continue to disappoint. Emerging markets, South Africa in particular, have been the flavour of the day for the past few months but this trend is reversing.

We expect the rand to remain under pressure as our government continues to accumulate debt.  Furthermore, the dollar should remain strong with Trumps US focused policies and superior US growth. South African equities are particularly cheap but vulnerable to global sentiment.

One needs to carefully pick companies that can grow their earnings in a low growth environment. We maintain a low exposure to South African government bonds. We prefer exposure to high-quality secured credit. We maintain a modest cash position, which gives us the dry powder we need to take advantage of bargains that may arise from any market sell-off. 

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