The Month in a Minute
📰 Overall: November was a strong month for shares and bonds, as the aftermath of the US election caused markets to rally and increase the chances of a soft landing (where interest rates are raised to reduce inflation — without the risk of a recession).
💪 Benchmark Performance: Wealthify's Original Plans and Ethical Plans all outperformed their benchmark.
📈 Market Movers: US (+5.3%), UK (+1.3%), Japan (+1.1%).
🗒️ Plan Summary: Original and Ethical Plans with a higher allocation to shares, performed better than those with a higher allocation to bonds.
🌍 Original Plans: Shares (+4.0%) and bonds (1.3%) both increased.
🌱 Ethical Plans: Shares (+4.3%) and bonds (1.3%) both increased.
🕰️ Going Forward: Shares outperformed bonds this month, and whilst we have increased the overall exposure to shares, but we remain confident in our relatively cautious positioning. We’re also optimistic that the diverse set of opportunities we’ve selected, will continue to have a positive effect on Plans for the rest of 2024, providing protection if economic conditions deteriorate.
Investors adjust to what another four years of a Trump presidency might mean for markets.
The major market development in November was the re-election of Donald Trump.
And, now the dust has settled, investors are feeling fairly optimistic.
Despite pre-election uncertainty surrounding the event itself, markets – particularly in the US – surged to all-time highs, outperforming other regions significantly.
Generally, Trump is seen as pro-growth and pro-deregulation — both of which might be good news for investors.
In his first term, Trump dialled back regulation significantly.
As a result, expectations for deregulation in his second term boosted sectors such as finance, energy, and cryptocurrency.
Trump is also expected to reduce taxes, likely extending his Tax Cuts and Jobs Act, which comes to an end in 2025. On top of that, he’s also advocated for the reduction of the corporate tax rate (currently 21%).
The probabilities of a soft landing have also changed; with inflation coming under control and Trump’s re-election, it’s an increasingly realistic prospect.
The Federal Reserve (the Fed) announced their second interest rate decrease in November.
However, meeting minutes showed policy makers are willing to pause rate cuts if necessary — suggesting caution is still needed.
There’s also a worry that some of Trump’s pro-growth strategies could be inflationary, which poses a risk to interest rate expectations.
This also presents the “no landing” scenario, where the US economy keeps growing and inflation reignites — making it harder for the Fed to reduce rates as quickly as the market is currently anticipating.
Another scenario with potentially global impact is the level of Trump’s proposed tariffs.
Although the heaviest of these are mainly directed at China, his proposed 10% universal tariff on all US imports would also have a significant impact on an already struggling eurozone economy.
When it comes to what a Trump presidency could mean for the UK, fears of the planned tariffs and other protectionist measures could have an impact on UK growth.
Many of the larger FTSE 100 firms, however, are multinational, meaning they might benefit from a weaker pound and strong US economy.
Interest rates also continue to come down, as the Bank of England (BoE) followed the Fed with the announcement of a further rate cut. Following the release of slightly higher-than-expected inflation figures driven by higher household energy bills, future rate cut expectations have been dialled back slightly; now, only three are expected by June 2025.
Despite November’s strong market performance, an element of caution is needed as a result of potentially under-the-radar market risks.
One of the main concerns is current market valuations, particularly in the US and its tech sector; these have only become more inflated since Trump’s re-election. The market correction that many were expecting may still be on the horizon, but the timeline may have been pushed back.
Markets
As expected, US markets (+5.3%) were the strongest performers this month, as pre-election uncertainty was lifted. Despite a slight pullback (which is understandable after such a strong rally) markets soon found their footing, powering through the end of November to reach all-time highs.
The UK FTSE 100 (+1.3%) and FTSE 250 (+1.4%) delivered good returns. Although dropping to a three-month low at the beginning of November following the Autumn Budget, they performed well in the second half of the month following increasing GDP growth figures.
Japan (+1.1%) also delivered modest returns, benefiting from the US tech rally due to its large makeup of tech stocks.
Emerging Markets (-3.9%) and Asia Pacif ex-Japan (-2.7%) delivered the worst returns for November as the prospect of a US-China trade war worried investors.
Currency
The pound weakened against the US dollar in November by 1.5%, with the latter gaining against most major currencies. Trump’s plans are generally seen as inflationary, leading to the dollar being at a six-month high compared to the pound, and a two-year high against the euro.
The pound also weakened against the yen by 3.7%, which had a strong month following favourable inflation data in Japan.
The pound did strengthen against the euro by 0.9%, which came under pressure amid political unrest in France.
Investment type performance breakdown
November was a strong month for Wealthify Plans — with all Plans outperforming their respective benchmarks.
Shares outperformed bonds, providing positive returns for our Original (+4.0%) and Ethical (+4.3%) Plans.
Bonds also provided strong returns for both Original (+1.3%) and Ethical (+1.3%) Plans.
Given their bias towards growth stocks (which should continue to do well under a Trump presidency) Ethical Plans outperformed Original ones.
The strongest returns came from our US and Japanese funds, with Infrastructure and Property also delivering a healthy contribution to Original Plans.
The money market continues to benefit from high interest rates, providing positive returns for both Ethical (+0.4) and Original Plans (+0.4).
Summary with Plan details
Despite increasing Plan allocation to equities, we remain cautious, as questions remain about aspects of the US economy and tech company valuations.
Should the soft landing happen, we’re well positioned to take advantage of this upside (with protection on the downside thanks to our allocation to bonds).
As long-term investors, we currently see bonds as providing good value in terms of income and capital appreciation.
This means Plans are well protected against unforeseen risks such as a global recession — which we think may still be underappreciated by the market, given the high valuations of shares.
Our Investment Team continues to actively monitor the financial markets and their impact on Plans — and are always ready to act in your best interest as events unfold.
We’re constantly evaluating new market information and key drivers, to help keep your Investment Plan on track.
It’s important to remember that it’s normal for markets to go up and down, with periods of volatility to be expected when you invest.
As always, we continue to look for opportunities to best position your investments, with the goal of protecting your money and achieving your long-term objectives.
With investing, your capital is at risk. Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
