Monthly Market Review - November 2023
Global markets rebounded in November, with changes in the expectations of policy rate providing impetus for the rally. During the month, the MSCI World Islamic Index advanced by 9.2%, while the Dow Jones Sukuk Index rose by 2.9%, as signs of economic moderation in the US and falling inflation across developed markets fueled expectations that we are nearing the tail end of global tightening cycles (source: Bloomberg).
For the second time in a row, the Fed held rates steady during its November meeting, strengthening the view that peak policy rates may have been achieved. However, the Fed was careful to maintain its hawkish stance, as minutes from the FOMC meeting made clear that the Fed is determined to keep policy rates at elevated levels for an extended period of time.
Inflation figures in the broader economy showed indicators of a weakening US economy. Headline and core inflation dropped to 3.2% and 4.0% year-on-year respectively, owing primarily to decreasing energy prices. As a result, Treasury yields were pushed lower across the curve. By the end of November, the US 10-year Treasury yield fell below 4.4%, down from its peak of 5.0% observed in mid-October (source: Bloomberg).
In Europe, similar trends of slowing inflation are observed, with UK’s headline and core inflation fell more than anticipated to 4.6% and 5.7% year-on-year respectively. Likewise, Eurostat’s flash CPI release for November showed headline and core inflation slowing to 2.4% and 3.6% year-on-year respectively, attributed to lower energy prices. However, industrial production and manufacturing activity in Europe remained subdued, particularly in Germany and France (source: Bloomberg).
Meanwhile, China’s economy continues to show mixed signs. Despite a 7.6% year-on-year increase in retail sales, there are lingering concerns about deflationary pressures. Latest consumer price data revealed a 0.2% decline, while producer prices dropped by 2.6% in October, pointing to a persistent lack of consumer confidence to increase spending, primarily driven by skepticism about the declining property sector. To counteract the decline in property and consumer prices, Chinese authorities have implemented significant measures, including cutting borrowing costs and imposing restrictions on certain mortgages and property purchases. However, for a sustained recovery across all sectors, more substantial and transformative reforms are necessary to stimulate domestic demand (source: Bloomberg).
Looking ahead, as Fed policy response remains data-dependent, the focus will continue to be on upcoming economic data releases, which may affect and shift interest rate expectations, creating uncertainty and volatility along the way. Regardless, historical data indicates that December, which coincides with typical year-end “window dressing”, generally tends to deliver a favourable return. As such, investors should remain vigilant and maintain discipline by sticking to their long-term investment strategy and remain invested through all market conditions.
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As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
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