Markets rebounded strongly in November, as investors made bets that interest rates would fall next year and the probability of a soft landing in the economy increased. The performances of the main indices are highlighted below:

(All figures are based on bid-to-bid pricing with income reinvested, in Sterling terms)


UK mid-cap stocks outperformed in November, as UK headline inflation fell to 4.6% in October, better than investors were expecting. Progress continues to be made in achieving the 2% inflation target rate, as price pressures in the service sector slowed from 6.9% to 6.6% in October, which has been where the stickiness of inflation has remained.

The ‘last mile’ in inflation is often the hardest to bring back to target because core inflation (ex-food & energy) inflation, which is at 5.7%, has been fuelled by higher wages due to the structural changes in the economy post pandemic of excess demand and the fall in labour supply. These imbalances in supply and demand are now reversing, and as a result in their latest meeting the Bank of England (BOE) kept interest rates unchanged at 5.25% and are now forecasting that inflation will fall to 2% by end of 2025, emphasising that rate cuts for the moment, are still unlikely to be on the horizon.

UK stocks continue to trade at a discount to their US counterparts and pleasingly UK quality small cap stocks performed well this month, presenting opportunities to investors, starting from a much better valuation base. We continue to remain overweight UK stocks, being diversified across the market cap spectrum and with a core blend of different investment styles.


Headline US inflation fell to 3.2% year on year in October, which helped push down US treasury yields across different maturities, as investors increased their demand for fixed interest rate investments on the anticipation that interest rates would fall next year, particularly at long end of the yield curve.  The benchmark US 10-year treasury yield currently trades at 4.2%, falling from its 5% peak in October.

The decline in treasury yields has boosted US stocks, particularly US technology and small cap stocks which trade at better valuations, as investors were risk on. This is shown by the fall in overall volatility as measured by the S&P VIX index which provides a gauge of fear or risk off sentiment in the market, which fell to the lowest level since January 2020.

The better US inflation figures have given hope to investors that interest rates will fall early next year.  The Federal Reserve held interest rates at their early November meeting at 5.25-5.50% and with inflation expected to be falling next year this will put pressure on the central bank to cut interest rates. This may particularly be the case if the economy shows signs of slowing next year as lagged monetary policy effects influence employment and output. However, consumer spending continues to be resilient, which has resulted in better-than-expected Q3 earnings contributing to a strong rally in quality/growth stocks.


Similarly, Eurozone inflation fell to 2.4% in November, providing relief to consumers and businesses, fuelling hopes that interest rates could fall in early 2024. Falling energy prices and lower growth in food and service prices were the main factors behind the slowdown in consumer prices.  As a result, European stocks rebounded in November after a weak October. There are signs that economic activity is slowing, with jobless rates rising and number of vacancies falling in Germany, which means short rates can only remain restrictive for so long, before the European Central Bank (ECB) will need to consider rate cuts to help promote better financial and economic stability across the Eurozone.

Asian & Emerging Markets

Asian & Emerging market equities also performed well on the back of positive investor sentiment that rates in developed markets could fall next year. If the US Federal Reserve can cut interest rates next year, this will give incentive for Asia/Emerging central banks to follow suit, where inflation is much lower and under control in these regions. A fall in US rates would help increase Foreign Direct Investment and decrease the value of their debt denominated in dollars. In addition, it would provide relief to consumers and businesses, with lower borrowing costs and should result in a positive knock effect on earnings of companies, where the market valuation of companies currently trade below that of developed markets.

China’s economy continues to show mixed signs of recovering, as consumer and industrial activity continues to rebound as shown by the positive numbers in October. Retail sales rose 7.6% year on year last month, however, this still appears to be insufficient to stop deflationary prices. Latest consumer price data showed prices falling by 0.2% and producer prices (input costs) falling by 2.6% in October. This indicates continued decline in consumer confidence to increase spending, due to the lack of faith in the declining property sector, which makes up a significant proportion of wealth for individuals.

Chinese authorities have taken major steps to try and stem the decline in property and consumer prices such as cutting borrowing cuts, restrictions on certain mortgages and property purchases. However, more radical reforms need to be pursued by the government to stimulate domestic demand for there to be a sustained recovery across all sectors.

Over the month our risk models have moved broadly in line with markets, outperforming their respective benchmarks and peers, which has been a common trend thus far this year.

As always, should you wish to discuss your portfolio or markets more generally with your investment manager, then please do not hesitate to contact us.