Effective date: 30/11/2023After three consecutive months of decline, the MSCI World shows its first increase since August, with a positive performance of +6% (in euros) in November. The IT and Real Estate sectors outperform the index, rising by +10.1% and +8.3%, respectively. Market optimism, tied to the anticipation of central banks' interest rate stability, boosts the Real Estate sector, which hadn't seen an increase in three months. On the flip side, only the Energy sector displays a negative performance for the month, decreasing by -2.7% within the MSCI World index. This decline is attributed to the fall in oil prices. The oil market is under pressure due to concerns about excess supply. The slowdown in the American and European economies (and potentially in Chinese demand) weighs on demand as supply continues to grow. This trend would only reverse at the end of the month following the OPEC+ decision to further reduce crude oil production. The decline in gas prices adds to the pressure on the sector.
In November, the Federal Reserve (Fed) interest rates unchanged. Despite the caution expressed by the ECB early in the month, the idea of an end to the monetary tightening cycle gained traction and dominated by month-end. In his latest speech before the FOMC (scheduled for December 13), Jerome Powell emphasized "significant progress" regarding inflation, noting that the Fed has positioned its policy rates "largely in restrictive territory," a new formulation from him.
After rising for the third consecutive month in September (to 49) and then falling sharply to 46.7 in October, the manufacturing ISM stagnates in November at 46.7, close to its lowest levels since the post-COVID years. It marks the 13th consecutive month in contraction territory. If the "new orders" component improves slightly, it also remains in contraction territory. The ISM services inches up marginally in November to 52.7, compared to 51.8 in October, still remaining in the very low range for periods of economic expansion. The "new orders" component remains stable, while the "backlog of orders" component deteriorates and returns to contraction.
Across the Atlantic, the ECB also kept interest rates unchanged for November. Christine Lagarde anticipates a return to the +2% target by 2025. The European Commission revised its growth forecasts downward, with GDP projected at +0.6% in 2023 (compared to +0.8% for the last forecast) and +1.2% in 2024 (compared to previously projected +1.3%). The ECB also predicts a contraction or stagnation of GDP in Q4. In November, total inflation in the eurozone fell to 2.4% on an annual basis (after 2.9% in October). Core inflation continued its decline to 3.6% in November, compared to 4.2% in October. Total inflation fell below the consensus, which expected it to be at 2.7%. The eurozone composite PMI rebounds from 46.5 in October to 47.1 in November, thanks to an improvement in the indicator in services (from 47.8 to 48.2) and in industry (from 43.1 to 43.8). Activity and new orders have declined for the 6th consecutive month, and employment has decreased for the first time in 3 years. According to SP, the PMI could signal a new contraction of GDP in Q4 2023.
Over the month, the fund outperformed its reference index. Technology was the best contributor to relative performance, driven by semis rebound (AMD +23%, STM +25%) benefitting from various comments on AI and better prospects for 2024. Palo Alto (+21%) and Crowdstrike (+34%) rose sharply on both geopolitical tensions and good quarterly results. Industrials also gained as investors bought more cyclical assets: Schneider Electric (+20%) and Owens Corning (+20%) were the two best contributors. Real Estate and Utilities posted good returns as interest rates fell across developed countries.
In terms of movements, we sold Amazon for ESG reasons. We initiated a position Linde within the portfolio, a leader in industrial gas as well as on Compass within Catering services. We increased position on Palo Alto and Visa, while taking profits on Crowdstrike and Toyota. We cut exposure to Lithium companies.