NOVEMBER 2024

Make America Gainful Again was the mantra and became the playbook following Trump's electoral victory. US stocks eclipsed European and Emerging Markets by a very wide margin. The Russell 2000 index gained 11%, its strongest month of the year. Banks and Energy infrastructure were favored, up more than 13%. The risk-on tone marked a sharp preference for Early Cycle exposure: notable upgrades for Transportation and Consumer Discretionary in our Cycle Dashboard, at the expense of Materials, Health Care and Cons. Staples. Exposure to Innovation included strong winners, such as Space (+26%) and Fintech (+17%), although select pockets of weakness remained, such as Marijuana and Cleantech. Serving as a good omen for an eventual recovery of Capital Markets, IPOs and SPACs indices gained more than 12%.

Stock volatility and Put Protection dwindled. Interestingly, retail Bears outnumbered Bulls at month end.

Natural Gas gained nearly 25% last month to $3.35, even briefly touching $3.50 (52-week high). Silver and Copper both depreciated by 6%. Steel and Iron Ore remained under pressure (c. -20% YTD). Lumber (+7%) continued its ascent, briefly crossing the $600/MBF mark. ?Coffee (+31%) and Cocoa (+26%) prices jumped.

The US Dollar remained on an uptrend; the DXY index gained 1.5%. European currencies suffered; the EUR slipped nearly 3%, falling as low as $1.04 over the period. LatAm FX faced continued headwinds; the BRL fell 3%, its 9th negative month of the year, now -20% YTD. The JPY was the sole G10 FX gaining vs the USD. Cryptos soared.

Interest Rates fell last month, reversing only a fraction of prior month’s increase. High Yield Credit Spreads tumbled as low as the 270bps level.

Chart of the month

A Rising Tide Lifts Heavier Boats

Following Donald Trump’s victory, a surge in risk appetite drove a notable market rotation towards smaller capitalizations and, even more strikingly, lower-quality issuers. In just weeks, stocks in the bottom quintile of quality soared by 20%+. Separately, most shorted names and recent IPOs charged forward.

This environment created fertile ground for the Innovation theme to thrive.

DISRUPTING INNOVATION

Investing in the Innovative theme inherently carries higher risk, demanding precise conditions for success. Could now be the moment?

True exposure to Innovation offers unparalleled growth potential but often comes at the expense of fundamental strength and credit quality. Beyond technological breakthroughs, growth prospects are bolstered by rising adoption rates, fueled by increased Capex commitments and expanded lending capacity. The establishment of national pro-innovation policies could further amplify demand.

To thrive, Innovation requires favorable market sentiment and active capital markets. A stronger risk appetite among investors will align with issuers' capital needs, enabling them to finance and realize their ambitions.

Join us this Friday, December 6th, to explore the current landscape and opportunities in Innovation.

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