A November to remember

November was a sensational month for risk assets in the aftermath of the US election and positive vaccine data. Equity markets finish the month with some of their best monthly gains ever and the US dollar slumped. Ashraf posted charts of Gold vs USD and Gold vs EUR, highlighting the possibility of moving the goal posts for the yellow metal before assessing the next low. Early week data continues to show the global economy recovering at a strong pace. A new trade was issued after Monday's London close.  The DAX trade hit the Premium stop, but avoided the 13445 addressed in the WhatsApp Broadcast Group. 

The monthly equity numbers for November are staggering. It started with a huge bid for option protection into the US election that quickly unwound at the start of the month and was followed by a trio of positive data releases on upcoming vaccines. The result was a monthly gain in global equities that stretched from 11% (S&P 500) to 27% (Spain's IBEX 35).

This was clearly the month the market began to look beyond the pandemic and the momentum continued late into the month as the safe haven bid for gold evaporates. It slumped late in the month and that continued with a decline to $1781 on Monday. What's troubling for gold bulls is that all the declines are coming as the US dollar slumps, something that's mechanically bullish for all commodities.

Who'd have known that energy and financials would be the month's best performing sectors, gaining 29% and 17% respectively, with Tech up 11% and healthcare +7%. 

The US dollar was the worst performing major in November while the kiwi led the way, up 6.5%. In emerging markets it was the beaten-down BRL leading the way with a 7.6% gain.

It all begs the question: Can this keep on going?

There's no fundamental answer. The pandemic clearly continues to rage but the market stopped caring about the headlines altogether in November. Fresh restrictions in Europe and elsewhere barely led to a flinch in markets. It's tough to see that changing.

At the same time, the defining characteristic of the recovery is how it's consistently outpaced economist expectations. Though the pace of improvement is slowing, the data continued to impress to start the new week as Japanese industrial production and the official China PMIs outpaced the consensus.

We concluded long ago that we're in a post-pandemic market but how far it runs is more a function of sentiment than economic status. Yet, there is no sign that easy money from central banks and governments are drying up. There are still a number of markets playing catch-up, particularly emerging markets. That's going to draw capital out of US dollars and other safe havens and into beaten down currencies, especially those with commodity exposure.

Be cautious of swings at month end then into December. Given the magnitude of these equity moves, the flows will be overwhelming in many assets.