Blog Posts — December 3, 2019

November Gains Put Stocks on Track for Vintage Year

by STOXX

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Stocks rose for a ninth month this year in November amid hopes for a thaw in the trade war between the US and China, and optimism that the global economy may gather pace.

The STOXX® Global 1800 Index climbed 2.8% in dollar terms¹ during the month, taking the gain so far in 2019 to 25%. The index is on track for its best annual return since 2013.

The STOXX® North America 600 Index led the advance among three major regions, adding 3.7%. The STOXX® Asia/Pacific 600 Index increased 0.4%. The pan-European STOXX® Europe 600 Index climbed 2.8% when measured in euros. Excluding dividend payments, the benchmark rose to within 1% from its 2015 record high.

The Eurozone’s EURO STOXX 50® Index also increased 2.8%. The index is more than 30% below its 2000 all-time high when excluding dividends, and registered during November its second-lowest annualized volatility on record.

The STOXX® USA 900 Index advanced 3.7% to a new record high. The STOXX® Japan 600 Index rose 1.8% in yen.

Throughout the month, US and China authorities indicated that the countries were near a preliminary deal to foster bilateral trade and call off announced tariffs. Meanwhile, reports covering from German gross domestic product to Chinese manufacturing data and US jobs figures suggested the global economy may have regained momentum.

Emerging markets struggle

In total, 17 of 25 developed markets tracked by STOXX advanced during the month when measured in dollars. The STOXX® Ireland Total Market Index led gains after rising 6.2%. At the other end, the STOXX® Luxembourg Total Market Index fell 3.5%. The STOXX® Developed Markets 2400 Index rose 2.8% in dollars and 4% in euro terms, as the common currency lost 1.2% against the greenback during the month.

The picture wasn’t as rosy for emerging markets. Twelve of 21 developing-nations indices retreated when measured in dollars. The STOXX® Emerging Markets 1500 Index fell 0.9%. The STOXX® Total Market Chile Index came up last in the group for a second straight month, plummeting 13% amid ongoing political protests in the South American country.

National indices for Brazil, Russia and China also dropped during the month.

Technology on top

All but five of 19 supersectors in the STOXX Global 1800 Index gained in the month. The STOXX® Global 1800 Technology Index led returns with a 5.2% advance. The STOXX® Global 1800 Utilities Index was the month’s worst performer, shedding 1.9%.

Minimum variance, high dividend not in favor

Amid the broader rally, minimum variance strategies had a particularly poor showing relative to their market-capitalization-weighted benchmarks.

The STOXX® Global 1800 Minimum Variance Index returned 0.9%, almost 2 percentage points less than the benchmark STOXX Global 1800 Index. The STOXX® Global 1800 Minimum Variance Unconstrained Index posted a 0.5% loss.

Minimum-variance strategies recorded an even wider underperformance within US stocks. The STOXX® USA 900 Minimum Variance Index trailed its benchmark by 2.7 percentage points, while the unconstrained version did so by over 4 percentage points. Such a difference is usually indicative of increasing investor risk appetite.

Income strategies were another area that had a very difficult month. The STOXX® Global Maximum Dividend 40 Index, which selects the highest-dividend-yielding stocks, fell 1.4% in dollars on a net-return basis. The STOXX® Global Select Dividend 100 Index, which tracks companies with sizeable dividends but also applies a quality filter such as a history of stable payments, gained only 0.2% on a gross-return basis.

The STOXX® Global Select 100 EUR Index, which is measured in euros, rose 1%. The index blends increasing dividend yields with low volatility.

ESG, Low Carbon, Climate

STOXX’s ESG and Sustainability indices performed broadly in line with benchmarks during November. The STOXX® Global ESG Impact Index underperformed the STOXX Global 1800 Index by only 4 basis points. The former selects stocks based on key sustainable performance indicators.

Within STOXX’s Low Carbon Indices, the EURO STOXX® 50 Low Carbon Index outperformed the flagship EURO STOXX 50 Index by 25 basis points during November, while the STOXX® USA Low Carbon Index beat its benchmark by 31 basis points.

After a strong relative performance in September and October, the STOXX® Global Climate Impact Ex Global Compact Controversial Weapons & Tobacco Index climbed 2.2%, trailing the STOXX Global 1800 Index by 53 basis points. The climate index is still beating its benchmark for 2019.