Stocks jump in November on expectations that rates have peaked

Stocks jumped by the most in three years in November as better-than-expected inflation reports bolstered investors’ expectations that interest rates in the US and elsewhere may have peaked. 

The STOXX^® Global 1800 index rose 9.4% last month when measured in dollars and including dividends,^[1] its steepest rise since November 2000. The index finished the month 0.2% shy of its 2023 high in July and 3% below a record, and is now up 18% for 2023. The benchmark slid 17.9% in 2022, its worst year since 2008, as central banks pressed ahead with higher rates to fight runaway inflation. The index rose 6% in euros in November as the common currency appreciated 3.2% against the greenback. 

The STOXX^® World AC index added 9.2% in dollars in November. The Eurozone’s EURO STOXX 50^® advanced 8.1% in euros in the month on a total-return basis, while the pan-European STOXX^® Europe 600 rose 6.6%.^[2] The STOXX^® North America 600 increased 9.5% in dollars, as did the STOXX^® USA 500. The STOXX^® Asia/Pacific 600 gained 7.7% in dollars. The STOXX^® Developed World climbed 9.4% and the STOXX^® Emerging Markets rose 8.2%.

Figure 1: STOXX Benchmark indices’ November risk and return

_{Source: STOXX. Gross returns. Data as of Nov. 30, 2023.}

Figure 2: STOXX Equity World indices’ November risk and return

_{Source: STOXX. Gross returns. Data as of Nov. 30, 2023.}

Germany’s DAX^® rose 9.5% in the month. MDAX^®, which gauges the performance of German mid-caps, increased 8.9%. 

US consumer prices slowed more than expected to an annual rate of 3.2% in October, the government reported on Nov. 14, bolstering expectations that the Federal Reserve’s policy tightening is working and that the central bank may not need to raise interest rates further. Inflation also slowed in the Eurozone, to 2.4% in November from 2.9% a month earlier, lower than economists had anticipated.^[3]

Figure 3: Total annual % returns for STOXX World AC index

_{Source: STOXX. Gross returns.}

Figure 4: Select STOXX benchmarks’ returns since Jan. 1, 2020

_{Source: STOXX. Gross returns in dollars except for STOXX Europe 600 Index, which is in euros. Data from Dec. 31, 2019, to Nov. 30, 2023.}

Volatility

The EURO STOXX 50^® Volatility (VSTOXX^®), which tracks EURO STOXX 50 options prices, fell to 13.8 at the end of last month from 19.7 in October. A higher VSTOXX reading suggests investors are paying up for puts that offer insurance against stock price drops. The VDAX-New^®, which measures volatility in German equities, dropped to 13.3 from 18.9 in October. 

Automobile shares pace gains

All 20 Supersectors in the STOXX Global 1800 had positive returns in the month. The STOXX^® Global 1800 Automobiles & Parts index swung from worst Supersector in October to lead gains in November with a 14% advance.

All 25 developed markets tracked by STOXX rose in the month when measured in dollars. After coming last in October, the STOXX^® Israel Total Market index was the best performer last month with an 18% gain. All but one — China — of 21 national developing markets tracked by STOXX advanced. 

Factor investing

On a global basis, Quality showed the best performance while Low Risk was the weakest style, according to the STOXX Factor indices. The STOXX^® Global 1800 Ax Quality added 11.2%.

Figure 5: STOXX Factor (Global) indices’ October risk and return characteristics

_{Source: STOXX. Gross returns. Data as of Oct. 31, 2023.}

Climate benchmarks

Among climate benchmarks, the STOXX^® Global 1800 Paris-Aligned Benchmark (PAB) (+10%)^[4] and the STOXX^® Global 1800 Climate Transition Benchmark (CTB) (+9.9%) outperformed their benchmark in the month. The PAB and CTB indices follow the requirements outlined by the European Commission’s climate benchmarks regulation.

Among the STOXX Low Carbon indices, the EURO STOXX 50^® Low Carbon (+8.5%) outperformed the EURO STOXX 50 by 40 basis points in November. Elsewhere, the STOXX^® Global Climate Change Leaders (+8.2%), which selects corporate leaders that are publicly committed to reducing their carbon footprint, underperformed the STOXX Global 1800 by 118 basis points.

Sustainability indices

The STOXX^® Global 1800 ESG-X index gained 9.8% in the month. The STOXX^® ESG-X indices are versions of traditional, market-capitalization-weighted benchmarks that observe standard responsible exclusions. 

Within indices that combine exclusions and ESG best-in-class integration, the EURO STOXX 50^® ESG index rose 8.2%. Germany’s DAX^® 50 ESG index (+10.8%), which excludes companies involved in controversial activities and integrates ESG scoring into stock selection, beat the benchmark DAX.

Among other STOXX sustainability families, the STOXX^® Global 1800 ESG Broad Market added 9.7% in the month. The STOXX ESG Broad Market indices apply a set of compliance, product involvement and ESG performance exclusionary screens on a starting benchmark universe until only the 80% top ESG-rated constituents remain. 

The STOXX^® Global 1800 ESG Target rose 9.8%, the EURO STOXX^® ESG Target gained 8.3% and the DAX^® ESG Target added 10.9%. The STOXX and DAX ESG Target indices seek to significantly improve the benchmark portfolio’s ESG profile while mirroring its returns as closely as possible. Through a series of constraints, the indices implement an optimization process to maximize the overall ESG score of the portfolio while limiting the tracking error to the benchmark. 

The STOXX^® Global 1800 SRI advanced 10.2%. The STOXX SRI indices apply a rigorous set of carbon emission intensity, compliance and involvement screens, and track the best ESG performers in each industry group within a selection of STOXX benchmarks. 

Finally, the DAX^® ESG Screened added 9.7% in the month. The index reflects the composition of the DAX benchmark minus companies that fail to pass norms-based and controversial weapons screenings, meet minimum ESG ratings or are involved in certain business activities considered undesirable from a responsible investing perspective. 

Thematics, dividend strategies

Twenty-five of 34 STOXX^® Thematic indices outperformed the benchmark STOXX Global 1800 last month, led by the STOXX^® Global Intelligent Computing index. 

Dividend strategies also had strong returns last month. The STOXX^® Global Maximum Dividend 40 (+9.1%) selects only the highest-dividend-yielding stocks. The STOXX^® Global Select Dividend 100 (+7.7%) tracks companies with sizeable dividends but also applies a quality filter such as a history of stable payments.

Minimum variance

Minimum variance strategies had weak relative performances last month. The STOXX^® Global 1800 Minimum Variance rose 5.4% and the STOXX^® Global 1800 Minimum Variance Unconstrained advanced 4.4%. 

The STOXX Minimum Variance Indices come in two versions. A constrained version has similar exposure to its market-capitalization-weighted benchmark but with lower risk. The unconstrained version, on the other hand, has more freedom to fulfill its minimum variance mandate within the same universe of stocks.

^[1] All results are total returns before taxes unless specified.
^[2] Throughout the article, all European indices are quoted in euros, while global, North America, US, Japan and Asia/Pacific indices are in dollars. 
^[3] WSJ, ‘Eurozone Inflation Fell More Than Expected, Putting ECB Rate Cuts Into View,’ Nov. 30, 2023. 
^[4] Figures in parentheses show last month’s gross returns.