CONTRIBUTORS
Mohieddine (Dino) Kronfol
Chief Investment Officer, Franklin Templeton Global Sukuk and MENA Fixed Income
Key monthly market news
November 2024 was notable for the US presidential election in which Donald Trump secured 312 electoral votes to incumbent Vice President Kamala Harris’s tally of 226. Trump’s victory and the Republican Party’s success in gaining a majority in both chambers of the US Congress was welcomed by those investors likely to benefit from a more market-friendly and economic growth-focused administration. However, investors outside the United States were more cautious as they were concerned about the president-elect’s tariff plans and their implications for global trade.
Gulf Cooperation Council (GCC) bonds rose slightly in November, with the FTSE MENA Bond – GCC Index posting returns of 0.56% in US-dollar terms.
Global aggregate bond indexes were also up a little, with the Bloomberg Global Aggregate Index returning 0.34% in US-dollar terms. US bonds led the field, while pan-European bonds were the month’s worst performers.
Hard-currency emerging market bonds registered positive returns too, despite a strengthening greenback against most major currencies.
Global equities collectively rose in November, driven largely by a significant post-election rally in US stocks, which were bolstered by Trump’s victory and the potential for additional tax cuts and expansionary fiscal policy.
US and international benchmark crude oil futures prices posted mixed performance in November, with the price of Brent crude rising slightly to US$74.27 per barrel (pb), while the cost of West Texas Intermediate crude was down marginally to end the month at US$68.72 pb.
Outlook
Even though our probability estimates for a significant slowdown in the United States have reduced significantly over the past few months, the possibility still exists. Also, credit spreads have continued to tighten, approaching all-time lows, reinforcing our defensive bias despite improving growth outlooks. The possibility of tariffs and potential volatility of emerging market currencies after the new administration assumes power in January tempers our non-US dollar allocation.
We still anticipate more market volatility over the next few quarters, given the uncertain economic and (geo)political environment we are trying to navigate, and our outlook continues to support an increase in defensive allocations to higher-quality fixed income sectors—such as GCC bonds—as rate cuts continue unfolding into 2025.
Continue reading further by downloading the PDF, which highlights the performance, rating changes, issuances, and outlook for the month ending November 2024.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.