November 2021 capital markets outlook and risk metrics

November 2021


  • After a difficult September, global equity markets posted positive returns in October even as global supply chain disruptions and robust consumer demand drove inflation higher. Significant financial entities (e.g., IMF) are analyzing the potential for mounting inflationary forces to disrupt the outlook for the global recovery.
  • Global equity markets posted returns generally between 1% and 9% in the month of October, with US equities outperforming non-US equities.
  • Reversing September’s outperformance, US value stocks lagged growth stocks across all market capitalizations in October. For example, the Russell 1000 Growth index returned 8.7% in the month, versus the Russell 1000 Value index’s return of 5.1%.
  • China’s equity markets recovered in October and returned 3.2%, outperforming the MSCI Emerging Markets index which returned 1.0%.
  • Bond markets saw mixed returns as rising inflation expectations dampened returns. The Bloomberg US Aggregate index returning 0.0%, while TIPS generated positive returns with the Bloomberg TIPS index return 1.1%.
  • The Bloomberg US Long Government Bond index returned 1.8% as the market adjusted long-term inflation risks lower.
  • Global and US REITS posted strong positive returns in the month of October with the MSCI US REITS index returning 7.7%, and the FTSE NAREIT Equity Index returning 7.6%.
  • Natural resource equities outperformed the broad commodity index with the S&P Global Natural Resource index returning 4.8%, while the Bloomberg Commodity index returned 2.6% for the month.
  • US headline inflation for September reached 5.4% year-on-year, largely driven by higher energy costs, which rose 24.8% year-on-year, while core inflation (CPI ex. food and energy) rose 4% year-on-year.
  • Energy prices continued to rise in October. In China, flooding and high natural gas prices have prompted energy rationing schemes and higher energy costs for manufacturers. In Europe, natural gas prices have driven power costs higher and pushed inflation to multi-decade highs.
  • In October, the US Senate agreed to fund a temporary extension of the debt ceiling for $480 billion.
  • In China, the potential default of mega-real estate company, Evergrande, put a strain on markets. Investors worry whether a potential default will be limited to just Evergrande’s creditors or if its troubles are a symptom of a broader real estate and economic downturn in China.
  • Vaccine efficacy remains uncertain as some countries enact targeted booster programs, while Delta variant cases appear to be falling in the US and Europe. Meanwhile, China has reinstated some targeted local lockdowns in response to COVID outbreaks.