Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

Trade and geopolitical uncertainty continued to be on the forefront of investors’ minds in November. Although many markets (most notably emerging markets) posted positive returns for the month, the path to those gains was anything but smooth. The Russell 3000 Index finished the month with a return of +2.0% but had been down for the period coming into the final week. Smaller cap stocks were slightly off the pace with the small cap Russell 2000 Index returning +1.6% versus the large cap Russell 1000 Index’s return of +2.0%. Performance in non-US markets was more divergent. The developed market MSCI World ex USA Index returned a modest -0.1% while the developing market MSCI Emerging Markets Index returned +4.1%. The US dollar was incrementally higher which dampened returns for US investors. Fixed income markets were mixed as yields fell but credit concerns rose. The Bloomberg Barclays US Aggregate returned +0.6%.

At the sector level in the US, Health Care (+6.2%) was the best performing sector with Materials (+3.5%), Producer Durables (+3.4%), and Utilities (+3.2%) also strongly positive. Energy (-3.2%) was the worst performing sector as supply pressures continued to weigh while Technology (-2.5%) was also negative on earnings and growth concerns.

Outside of the US, Utilities (+3.9%) and Technology (+2.4%) were the best performers with Technology results being a notable difference from the US. Energy (-4.1%) and Materials (-2.5%) were the only negative sectors for the month. At the country level, emerging markets were the main leaders with Turkey (+13.2%), Indonesia (+13.0%), and Macau (+12.8%) significantly positive. The small markets of Argentina (-8.9%), Malta (-8.7%), and Greece (-5.2%) led decliners.

While the month saw streaks of positive and negative performance, market volatility as shown by realized and implied volatility measures was actually lower than what was witnessed in the sell-off of the prior month. Trade volumes also declined from the prior month but were still at slightly higher levels than the recent past. At the factor level, the defensive attributes of Stability, Value, and Yield were positive while Quality, Momentum, and Smaller Size were modestly negative. Equal-weighted portfolios underperformed market-cap weighted portfolios once again given the drag of smaller size.