Selected Market Indicators for Periods Ended 30 November 2020

Global equities saw strong returns across the board in November as the outlook for a successful Covid-19 vaccine boosted expectations that the worst of the pandemic, and associated financial hardships, could be over. The strong market performance also followed a positive reaction to the preliminary results of the US presidential election, with President-elect Joe Biden the apparent victor. The Trump administration has launched legal challenges in a number of key states, although as it stands, Joe Biden will take office as the 46^th US President on 20 January 2021.
 
The MSCI World Index rose +6.1% in unhedged NZD over the month (+12.0% in local currency), while emerging markets were up +2.7% in unhedged NZD (+7.8% In local currency). Domestic equities continued to perform well, finishing up +5.7% for the month. Domestic bond markets saw outflows during November, falling -1.5% as investor appetite for risk increased. Global bonds gained +0.5%, supported by the strong relative performance of global credit markets.
 
An estimate of the Balanced Fund gross index returns based on selected market indicators for November is 4.3%
 
Significant developments during the month include:

• American Biotech company, Moderna announced this month that their Covid-19 vaccine had a 94% efficacy rate, just days after announcements that the Pfizer/BioNTech vaccine had shown to be 90% effective in trials against the virus. A successful vaccine bodes well for the prospect of a return to more “normal” levels of economic activity in 2021.
• The Dow Jones rose above 30,000 for the first time ever, buoyed by inflows into industries set to benefit from a Covid-19 vaccine and the prospect of a return to pre-pandemic levels of economic activity. The energy and financial sectors saw the greatest gains.
• New Zealand has signed the Regional Comprehensive Economic Partnership along with 14 other nations, including ASEAN member states, Australia, China and Japan. The agreement represents the world’s largest trade agreement and will look to bring down trade barriers between the associated members.
• Brexit negotiations were suspended for a week due to a top EU negotiator testing positive for Covid-19. This puts additional pressure on an already tight time frame with the agreed transition period due to end on 1 January 2020.

Trans-Tasman Equities 
The New Zealand market performed well following a positive October, with the NZX50 Index gaining +5.7%. The narrative was the same across the Tasman, with Australian equities returning +10.2%. Despite strong November returns, the ASX remains in negative territory (-2.0%) over the last 12 months, largely due to weakened commodity prices and on-going trade disputes with China.
 
Global Equities 
Global equities had an extraordinary month, rallying +12.0% in local currency terms. Small Caps led wider global equities, finishing the month up +14.2% and demonstrating the broad-based nature of the November market rally, driven by a combination of positive vaccine announcements and the perceived favourable outcome of the US presential election.
 
Property and Infrastructure
Investor optimism spread to some of this year’s hardest hit sectors this month with global listed property rallying in line with its equity peers, up +11.6%. Infrastructure also performed positively (+6.1%). Both sectors remain down over the last 12 months, but should benefit from the prospect of widespread economic and social restrictions being lifted if a vaccine proves successful.
 
NZ Bonds and Cash 
All domestic bond indices fell over November. Coporate bonds (-0.9%) outperformed government bonds (-1.8%) over the month. The NZ composite index (a mix of government and corporate bonds) returned -1.5%. The NZ 10-year bond yield continued to move higher, finishing at 0.87%. Returns for cash remain low.
 
Global Bonds
Despite a risk on sentiment in equity markets, global bond indices also managed to perform positively over November. Benefitting from the increased risk appetite, global corporate bonds finished up +2.0%, outperforming the global government index (+0.2%). Global aggregate bonds returned +0.5%. The US 10-year yield also moved higher, finishing the month at 0.84%.
 
Currency
The New Zealand dollar strengthened against all tracked currencies over the month, performing notably against the US dollar (+6.3%) and Japanese Yen (+6.1%). The New Zealand dollar appreciated +3.9% against the Trade-Weighted Index.