T3 Monthly Insights - Nov 2024

Donald Trump’s re-election, alongside a Republican majority in Congress, fueled a rally in U.S. markets throughout November. Expectations of pro-business policies—spanning tax cuts, expansionary fiscal measures, and a renewed emphasis on “America First” trade strategies—drove a surge in U.S. equities and strengthened the dollar. The S&P 500 rose 5.73% m/m to close at 6,032.38, while the Nasdaq gained 6.21% to finish at 19,218.17. The U.S. dollar also posted robust gains, with the DXY index touching a two-year high of 107 before closing the month at 105.737 (+1.69% m/m).

The Federal Reserve delivered a 25bps rate cut in November, adopting a dovish stance as it navigates the dual challenges of inflation and fiscal expansion. Core inflation remained steady at 3.3% y/y in October, consistent with September’s reading and market expectations. However, upcoming fiscal measures, including tax cuts and trade tariffs, are expected to sustain inflation above the 2% target through 2025, keeping the Fed on a cautious path. U.S. economic data underscored the resilience of the domestic economy, as October retail sales exceeded expectations, rising 0.4% m/m, while the November Flash Composite PMI climbed to 55.3, significantly outperforming contractionary readings in the eurozone (48.1) and the UK (49.9).

In contrast to U.S. market strength, the euro and pound both weakened against the dollar. The euro fell 2.82% m/m to 1.0577, its lowest level in two years, as the eurozone continued to grapple with persistent economic headwinds while inflation in the bloc edged back to ECB’s 2% target in October. In the UK, headline inflation rose sharply from 1.7% to 2.3% y/y in October, while core inflation ticked up from 3.2% to 3.3% y/y. In response, the Bank of England cut its policy rate by 25bps to 4.75% while raising its inflation projections for 2025 and 2026. The BoE’s cautious outlook reflected concerns over domestic fiscal pressures following October’s UK budget and potential disruptions from Trump’s proposed tariff plans. Sterling fell 1.27% m/m to 1.2735.

Elsewhere, the Australian and New Zealand dollars continued to weaken through Q4. The AUD declined 1.06% m/m to 0.6512, while the NZD fell 1.02% to 0.5916. As expected, the Reserve Bank of Australia held its cash rate steady at 4.35%, reflecting a cautious stance amid cooling inflation and a balanced labor market. Meanwhile, the Reserve Bank of New Zealand delivered its second consecutive 50bps rate cut, lowering the official cash rate to a two-year low of 4.25% as it addressed softening inflation and a weakening economic outlook.

Gold prices eased back to September levels, declining 2.48% m/m to $2,681. Despite the pullback, the precious metal boasts impressive YTD gains of 30%, underpinned by geopolitical risks and inflation concerns. Bitcoin, on the other hand, surged past the $100,000 milestone in November, climbing over 40% since Trump’s re-election. The cryptocurrency’s bullish momentum has driven YTD gains beyond 100%, fueled by expectations of crypto-friendly regulatory policies and robust investor demand for Bitcoin ETFs.