Equities November reign - SP500

For equity portfolios, it’s been an incredible month. European equities have been the standout, currently up ~15%, overshadowing both our personal favourite the S&P500 (+11.25%) and the high beta Nasdaq (+10.90%).

Charts (1)

After an equity rally of such magnitude and as bonds are set to finish the month flat there has been an expectation that asset managers who run balanced funds that consist of a 60:40 split between stocks and bonds would rebalance/reduce equity exposure into month-end.

Some of the world’s largest pension funds including the Japanese GPIF and the Norwegian Oil fund are thought to use the 60:40 asset allocation split. In all, balanced funds are thought to manage over $7tr.

Of course, asset managers don’t leave all their rebalance until the last day of the month. Rather the flows are spread out over several days. Which means that more likely than not the lion’s share of this month’s rebalance has already gone through without leaving even the faintest footprint.

When looking for reasons as to how the market has been able to absorb such sizeable selling, the answer is thought to come from the staggering amount of equity inflows following the U.S. election and the announcement of successful COVID19 vaccine trials.

Over the past three weeks, it is estimated there has been over $100bn worth of equity inflows, the largest ever amount over a three week period that only partially reverses almost two years of outflows.

Returning to the S&P 500, following its new all-time high at 3668, the S&P500 has spent the past three weeks consolidating the gains of early November.

In the process it has worked off overbought readings and providing the current period of consolidation/corrective price action extends no lower than wave equality support 3480/70 area, the uptrend is expected to resume into year-end towards 3750/3800.

Aware that a move much below 3470ish would warn that a deeper correction is underway towards the bottom of the range, 3200ish.

Source Tradingview. The figures stated areas of the 30th of November 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.