From Gloom to Boom

As the festive season approaches, investors find themselves in a far more optimistic mood compared to the gloom of the previous year. In the aftermath of a challenging October for global stock markets, November brought a welcome period of calm and substantial returns for various markets and regions, with many boasting double-digit gains for 2023.

Much of the newfound optimism centers around positive data from the US, indicating that central bank monetary policies are proving effective. A rapid surge in interest rates is effectively taming inflation and moderating the economy, creating a balanced scenario that heightens the chances of a reduction in borrowing costs in the upcoming year.

November’s market spotlight was on US tech stocks, particularly the Nasdaq Composite, which surged by 10.7%, surpassing recent highs and reaching levels not seen since April 2022. Companies like Intel Corp, Tesla Inc, Netflix Inc, and NVIDIA Corp posted impressive gains.

Internationally, Germany’s Dax climbed 9.5%, the S&P 500 rose by 8.9%, Dow Jones by 8.8%, and Japan’s Nikkei by 8.5%. In the UK, the FTSE 250 led the way with a 6.7% gain, while the FTSE All-Share and FTSE 100 posted more modest increases.

Despite some challenges, opportunities for substantial gains still exist, as demonstrated by several FTSE 100 companies achieving double-digit percentage increases. The likes of Ocado Group, JD Sports Fashion, Barratt Developments, and Rolls-Royce Holdings all saw remarkable growth in November.

Looking ahead to December, historically a strong period for stock markets, the focus shifts to the possibility of a Santa rally leading up to Christmas and year-end. December typically sees indices maintaining or even increasing their value, although recent years have witnessed exceptions.

In 2022, both the FTSE 100 and FTSE All-Share experienced declines, ending a run of positive Decembers. However, the current mood is notably more optimistic, with data suggesting that a deep recession is unlikely and interest rates could begin to decline in 2024. The question remains: Will stocks deliver gains this December, or will recent challenges temper the holiday cheer?