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November on the Financial Markets – Summary
The economic situation
In November, the issues surrounding Donald Trump's victory in the US presidential election (who won by a significant margin despite the polls indicating otherwise) added to the risks associated with global tensions. The Republican candidate's victory was further bolstered by a takeover of both the Senate and the House of Representatives. This balance of power, at least in theory, provides the opportunity to implement all the economic and political changes that have been announced. The extreme nature of some of the measures announced has created a great deal of uncertainty, as it will only be after 20 January 2025 that we know which of the proposals will be implemented, to what extent and at what pace. As we learn more about the shape and details of the new policies, we will be able to estimate their effects and the timing of their impact on both the US and global economies. For now, the US economy is doing very well. Growth rates are robust and inflation is under control. The labour market is expected to cool somewhat and consumer sentiment is balanced. In general, US data have been better than expected. Looking at other developed economies, after a very good start to the quarter and improved data, the last days of November saw some dampening of confidence.
In Poland, current consumer sentiment, as measured by the current consumer confidence index, deteriorated in November (for the second month in a row). The current consumer confidence index (CCCI) published by Statistics Poland (GUS) fell from -15.8% to -17.1%. The value of the leading indicator (FCCI), reflecting future sentiment, remained unchanged. Sentiment remains moderately pessimistic, but worse than in November 2023. According to GUS, the dynamics of sentiment in the enterprise sector improved in transport and warehouse management as well as accommodation and catering. The situation deteriorated in industrial processing, construction, retail and the finance and insurance industry. In the latter sector, sentiment is optimistic. Other sectors are experiencing pessimistic sentiment of varying intensity. Price growth rates have stabilised, as have wage growth rates. Retail sales growth data for October were much stronger than expected. According to GUS, real sales rose by 1.3% y/y after a decline in September, against expectations of 0.7%. The real sales growth rate was 7.8% compared to September. Moreover, Polish industrial output sold, non-seasonally adjusted (at constant prices), increased by 10.0% in October relative to September. Output growth rate reached 4.7% y/y (with levels below 2% expected). Seasonally adjusted output growth rate was 4.6% m/m and 3.9% y/y. Discussions about interest rate cuts continue. According to some analysts, cuts are expected towards the end of the first quarter or early in the second quarter of next year. The outlook and sentiment were somewhat spoiled by the President of the National Bank of Poland, Adam Glapiński, whose comments suggested that a scenario of no rate cuts at all in 2025 was possible. That said, it is important to bear in mind that communication has been highly inconsistent in recent months.
Bond markets
November was a volatile month for the bond market. Yields in the underlying markets followed post-election growth trends (US) and then started to decline. In the eurozone, political issues (Germany, France) dampened the outlook for economic growth and caused yields to fall. In Poland, after reaching their highest levels since July at the end of October, yields started to trend downwards, and could have fallen even further had it not been for issues related to a higher budget deficit, the prospect of financing the government's borrowing needs and discussions on monetary policy. Yield curves in both the US and the eurozone remain reversed (yields at the short end are higher than at the long end). In Poland, the yield curve is normal. In the US, 10-year bond yields fell by 0.11 p.p. against September, and Polish bond yields fell by 0.43 p.p. The spread of Polish bonds to German and US bonds first narrowed and then widened.
Stock indices
As regards the stock market, November was a month of mixed returns for global equity markets. Following the US election, the market began to capitalise on the positive outlook for the US economy and US companies associated with Donald Trump's victory. Small cap indices were the strongest performers (Russell 2000: +10.84%), but the major indices also posted decent returns: NASDAQ (6.21%), S&P500 (5.73%), Dow Jones (7.54%). The difference in returns between Value and Growth companies was not significant, with returns of 5.55% and 5.87%, respectively. In Western Europe, DAX rose (+2.88%) and CAC40 fell (-1.57). The Japanese market was in decline (Nikkei 225: -2.23%). The MSCI China Index (-4.41%) continued to lose ground amid disappointment over the actual size and implementation of the Chinese stimulus package.
Against this backdrop, the Polish stock market performed unsatisfactorily in light of corporate announcements, but relatively in line with economic data. The prevailing factor was weak sentiment towards emerging markets, linked to concerns about the international impact of the announced US measures and the perception of geopolitical risks in our region. As a result, the month ended with the following returns: WIG20 (-0.65%), WIG (-0.23%), mWIG40 (1.65%), sWIG80 (-1.56%). The Polish stock exchange continued to show significant variation in returns across sectors, with WIG FOOD (+11.94%) the strongest and WIG Basic Materials (-13.9%) the worst performer.
Exchange rates
The US dollar, as measured by the U.S. Dollar Index (DXY) reflected the so-called “Trump Trade” and has grown. November closed 1.69% up on October. At the same time, the zloty appreciated against the euro and the USD/PLN exchange rate increased.
Gold
Geopolitical risk remained high due to the situation in the Middle East, Trump's victory and the political situation in Western Europe. After reaching an all-time high, gold prices were highly volatile. First there was a sharp fall, then an equally sharp rise, which did not, however, break through the previously established maxima. As a result, the USD gold price fell by 2.88% m/m in November.
