What happened in November

Top three investment trends

1. Trump's US election victory: A new era of uncertainty and opportunity

The major driver of sentiment in November was Donald Trump’s election victory, with his Republican clean sweep significantly impacting markets.  So-called ‘Trump trades’ rallied strongly. The US S&P500 index rose 5.9 per cent, its strongest monthly performance so far this year, and the so-called ‘Magnificent Seven’ cohort of companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla) gained 9.4 per cent. Cryptocurrencies also rallied, with Bitcoin up 38.5 per cent in November alone.

Performance was also supported by ongoing strength in US economic data, with weekly initial jobless claims continuing to decline and the Conference Board’s November consumer confidence measure moving up to 111.7, the highest since July 2023. However, assets sensitive to tariffs reacted more negatively after Trump announced his intention to impose a 25 per cent tariff on Mexican and Canadian products once in office, and that China would face an additional 10 per cent tariff. As a result, the Philadelphia Semiconductor Index, which tracks US companies operating in the semiconductor sector, was down 0.4 per cent over the month, despite the US equity rally.

2. Europe's geopolitical landscape: Steering through uncertain times

Germany and France, Europe’s largest and second-largest economies, are experiencing political and economic instability due to their budget deficits. In Germany, the federal coalition government collapsed after Chancellor Scholz dismissed Finance Minister Lindner following disagreements over the country’s deficit and economic direction, prompting a likely vote of no confidence and general election in February 2025. Forecasts indicate that economic growth in Germany will be the lowest of the G7 this year.

In France, the minority government faced uncertainty over its survival as it sought to implement a budget combining €60 billion of spending cuts with tax rises to reduce its deficit. As feared, Prime Minister Barnier passed the budget without a vote, triggering a motion of no confidence, which he lost on 5 December. The preceding uncertainty led to the underperformance of French risk assets during November, with the CAC 40 down 1.5 per cent and Franco-German 10 year yield spreads widening to 81 basis points (bps). Indeed, spreads reached their widest level since the euro zone debt crisis a decade ago.

3. Interest rate cuts: Central Banks chart different courses

During November, there was growing scepticism that the Federal Reserve (Fed) would cut rates rapidly over the next year, with Fed Chair Jerome Powell highlighting US economic resilience and a recalibration of its policy stance. The two-year US inflation swap rate, which shows market expectations for inflation, increased by 10bps to 2.6 per cent over the month reflecting market concerns about a resurgence of inflation. This is consistent with the longer-term view that Trump’s policies could be inflationary. Despite this, the Fed is still forecast to cut rates in its December meeting by 0.25 per cent.

Conversely, investors now expect the European Central Bank to cut rates sooner than anticipated. There is growing potential for a 50bps rate cut in December due to weak economic growth, slowing services inflation and persistent trade uncertainty. As a result, European sovereign bonds were up 2.3 per cent (see Figure 1).

Regarding the Bank of England’s (BoE) final meeting in December, it is highly unlikely that it will cut interest rates following higher than expected employment data.

How did we position MAF Core and MAF Plus portfolios?¹

Growth assets

In November, investor sentiment improved following October’s caution, with broadly positive performance across global equity markets. In particular, the S&P 500 hit another new all-time high, with gains across various sectors. The exceptions to this equity recovery were Emerging Market, Asia-Pacific and European equities. All three markets lagged following the threat of increased tariffs, as announced by Trump. Emerging Market equities faced additional challenges as investors questioned the suitability of China’s proposed stimulus measures, and Europe was hit by the additional headwind of continued political uncertainty.  

Within MAF Plus, we increased our equity overweight during the month, focusing on US equities, which are well-positioned to benefit from the deregulation policies, corporate tax cuts, and fiscal measures expected under Trump. At the same time, we closed our European equity overweight and reallocated into the US, reflecting a weaker European outlook following the US election result and its trade implications. This adjustment proved beneficial, as our increased US equity exposure contributed positively to performance, while the closed European equity position detracted in November.

Defensive assets

Fixed income also recovered in November, with positive performance across global bond markets. The month started with both the Fed and BoE continuing their rate cutting cycles with 25bp rate cuts. Despite more recent caution around strong US data, and inflationary macro policies, investors expect further rate cuts by the Fed in December, as well as the European Central Bank (ECB) given weak growth prospects. This fall in yields has driven government bond prices higher, particularly in Europe where markets are pricing in the potential for a larger 50bp rate cut.

Within MAF Plus, we closed our long position in US Treasuries in November, anticipating that the inflationary effects of Trump’s policies could lead to higher yields and lower bond values. Meanwhile, our active positions supported performance, with our overweight in UK gilts adding value over the month and our underweight in Japanese bonds proving beneficial as markets priced in a potential rate hike by the Bank of Japan.

Alternative assets

Alternative assets within MAF Plus also delivered a positive return over the month. This was driven by our allocation to the Aviva Investors Multi-Strategy Target Return fund.

Market outlook and positioning

Both MAF Core and MAF Plus take a global approach to multi-asset investing, offering a more diversified profile than regional multi-asset portfolios.

From an active asset allocation perspective, we maintain a long position in equities with a preference for focused exposure within the US market. US equities have the potential to perform well in a disinflationary environment in which key developed central banks, including the Fed, are cutting interest rates.

Regarding fixed income, central banks’ tendency towards easing and the renewed focus on growth risks, particularly in Europe, are likely to place a ceiling on bond yields. In this scenario, fixed income is well-positioned to offer diversification within the portfolios.

In terms of equity regions, we have a focused overweight position in US equities. Going forward, US companies are expected to benefit from a combination of corporate tax cuts, deregulation policies and fiscal stimulus in the US. Earnings have also continued to be robust, helping to contain company valuations at a fairer level.

Regarding our fixed-income allocation, we are short Japanese government bonds with an overweight position in UK gilts. We believe that Japan is still in a hiking cycle given increasing inflationary pressures, paired with concerns around currency depreciation, which is supportive of more near-term rate cuts. In the UK, despite the recent jump in inflation driven by energy bills, inflation is expected to continue to fall, and macro data remains weak relative to other developed economies. Given this, we believe our gilt position could benefit from the growing potential for more rate cuts by the BoE relative to other developed central banks.