Market Review – November 2023

Global markets have rallied this month following October’s downturn. This follows steady progress in returning inflation to more normal levels, and suggests that there may be no need to increase interest rates further.

In other news, the crypto market has suffered a significant blow following the criminal charges brought against Binance, one of the main exchanges. This month also sees the start of COP28, where world leaders discuss and agree on efforts to tackle climate change.

Autumn Statement Highlights

Jeremy Hunt delivered the Autumn Statement this month, following weeks of speculation around tax cuts.

The headline measure was the cut to the main rate of National Insurance contributions. Employees will see their contributions reduce from 12% to 10%, while the self-employed will pay 8% instead of 9%. Of course, with tax bands frozen until at least 2028, this will only offset a small portion of the real-terms tax increases that many people are facing.

Other measures included proposals for a pension ‘pot for life,’ as well as greater investment in growth areas.

Projections around the economy are looking more positive, with inflation predicted to drop to 2.8% by the end of next year. The general view is that interest rates will be higher for longer than initially anticipated. The economy appears to be in a better position than suggested in March, with slow but steady growth predicted over the next few years.

In contrast to last year’s mini-budget, the reaction of the market was fairly muted.

COP28 – (28^th Conference of the Parties)

COP28 started this month, with world leaders meeting in Dubai. The main issue under discussion is whether a global agreement can be reached to phase out fossil fuels. The UAE (The United Arab Emirates is a major player in the oil and gas industry) will oversee the negotiations, with oil company executive Sultan Al Jaber selected for the role of president. Unsurprisingly, critics have pointed out the glaring conflict of interest.

The key goal of the summit is to ensure that global temperatures do not rise by more than 1.5C. This was agreed at COP26 (26^th Conference of the Parties) two years ago, along with a target of ‘net zero’ by 2050. Countries across the world agreed to new targets, and it looked likely that fossil fuels would be phased out over time.

But in the meantime, the energy crisis, along with conflicts in Ukraine and the Middle East, have led to a rise in the price of fossil fuels and soaring profits for oil and gas companies.

In the UK, the current government has made significant U-turns on the commitments made, including postponing a phaseout of petrol and diesel cars and embarking on new oil drilling projects in the North Sea.

The conflict between profits and climate responsibility is a long way from being solved and it remains to be seen whether any further progress will be made at this year’s summit.

The Great Crypto Crackdown

Cryptocurrency has come a long way in the last decade or so. It started as decentralised currency, a way to make payments online without banking restrictions or the need to give up your anonymity. The Bitcoin surge of 2021 brought crypto into the mainstream, encouraging more people to invest, and leading to discussions of the currency as an alternative asset class.

The conversation has turned to security and regulation, particularly following the high-profile criminal charges brought against CEOs such as Sam Bankman-Fried.

This month, crypto exchange Binance has incurred fines of over $4 billion and the chief executive, Changpeng Zhao, faces criminal charges for money laundering offences within the company. Binance controlled more than half of the crypto market at one point, but its future is uncertain now that its role in terrorist financing and other crimes has now been brought to light.

However, the ability to move money anonymously is a feature of some cryptocurrencies, not a bug, which is why criminal use of cryptocurrency has been vital to its success. Greater regulation and exposure of the risks is needed to protect consumers, but this in itself could reduce the appeal for the less scrupulous.

The UK Market

The UK market has seen a significant rally in the last month, with the FTSE All Share rising by 3% and the FTSE 100 increasing by 2.2%. This follows significant progress in bringing inflation down, with the rate reducing to 4.6% compared with 6.7% last month.

Economic growth looks slow but positive following the Autumn Statement, and the chance of a full recession has reduced. However, households are still facing increased costs and a higher tax burden on top of below-inflation pay-rises in many sectors.

Top performing companies this month include Watches of Switzerland Group, Trustpilot, and Ocado, although all three have yet to recoup longer-term losses.

The lowest performers include print technology company Xaar, and Dr Martens plc.

The Global Outlook

The North American sector returned 5.4% this month. Inflation has fallen to 3.2% as of October, the first decline in four months. This led to a dip in Treasury yields and a boost to stock prices. Analysts are cautiously optimistic and reports suggest that the Fed has finished increasing interest rates. Market sentiment suggests that rates will start to be cut next year, easing monetary policy.

Europe has seen the highest growth out of the developed economies this month, with a rise of 7.4% in the Europe excluding UK sector. Again, this follows better-than-expected progress on inflation, with a current rate of 2.4%.

The Asia Pacific region is slightly behind the other major markets, with growth of 3% this month. Chinese manufacturing has continued to contract and with falling tax revenues, the country is under increasing pressure to raise borrowing.

Please don’t hesitate to contact a member of the team for more information on any of the topics covered.