Against many expectations, Republican Party candidate, Donald Trump, won the United States (US) election. Following an initial bout of sell-offs, many developed share markets calmed after the election as Mr Trump’s victory speech of unity instilled confidence ahead of his induction in the New Year. Equity markets and commodities rallied on the back of expectations for expansionary policies whereas bond markets, concerned about the prospect of inflation, experienced a sharp sell-off.
The Australian equity market experienced strong growth over November, with the S&P/ASX 300 Accumulation Index increasing 2.8% for the month. There were positive returns across the majority of the market spectrum, with the best relative performer being the S&P/ASX 50 Accum, returning 3.6% for the month, while the worst and sole contractionary performer was the S&P/ ASX Small Ordinaries, decreasing by 1.2% over the month. The best performing sectors were Financials (+6.0%) and Energy (+3.3%). The weakest performing sectors were Healthcare (-1.6%) and Telecom Services (-0.4%). The largest positive contributors to the return of the index were CBA, BHP and Westpac, with absolute returns of 7.2%, 6.0% and 3.2% respectively. In contrast, the most significant detractors from performance were Newcrest Mining, CSL and Woolworths with absolute returns of -13.4%, -2.4% and -3.2% respectively.
The broad MSCI World ex Australia Index was up 2.8% in hedged terms and 4.5% in unhedged terms over the month, as the Australian dollar depreciated against the US dollar and Pound Sterling over November. The strongest performing sectors were Financials (+11.0%) and Energy (8.8%), while Utilities (-3.4%) and Consumer Staples (-2.3%) were the worst performers. In Australian dollar terms, the Global Small Cap sector rose 7.3% while Emerging Markets decreased 1.7% in unhedged Australian dollar terms. Over November, the NASDAQ returned 2.6%, the S&P 500 Composite Index rose by 3.7% and the Dow Jones Industrial Average increased 2.6%, all in US dollar terms. Major European equity markets experienced negative returns as the FTSE 100 (UK) decreased 2.0%, the DAX 30 (Germany) decreased 0.2% while the CAC 40 (France) grew 1.6%. In Asia, the Indian BSE 500 was down 5.6%, the Hang Seng Index down 0.5%, the SSE Composite (China) down 4.8% while the Japanese TOPIX experienced another solid month with a strong 5.5% growth over November.
The Australian dollar experienced mixed movements over November, falling against a rising US dollar, finishing at US$0.739 but with a slightly increased Trade Weighted Index of 65.3 on 30 November 2016. The Australian dollar depreciated against the US dollar (-2.0%) and the Pound Sterling (-4.1%), but rose against the Euro (+1.3%) and the Yen (+5.6%). On a tradeweighted basis, the local currency increased 0.5% over the month.