November 2022 Monthly Review

Jordi Visser

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Risk assets continued their upside move in a back-and-forth November. The S&P 500 (SPX) closed up more than +5% for the second month in a row. This is the second time we have seen back-to-back +5% moves since the market was coming off the lows during the Great Financial Crisis (GFC). The majority of the rally occurred on the final day of the month after Fed Chair Powell gave a speech that was perceived as less hawkish than expected. Before the speech, November was a volatile month which started with a sharp selloff before stabilization and then saw strength into the last day of the month. 

During the month, there was a violent fall in equity momentum driven by mean reversion in macro trends that dominated the year.  This began with investors repositioning for lower inflation and a Fed ready to slow down rate hikes. As such, 10yr yields had their largest monthly drop of the year, and the dollar fell sharply. Over a two-day period, the Morgan Stanley Momentum Index fell more than 10%, causing large moves in market-neutral portfolios that were sitting in trending positions. Despite the intraday volatility in momentum, stocks and credit were both stronger, with Investment Grade (IG) posting its best month since the GFC.

Hedge fund trends continue to show a lack of risk-taking, with the GS VIP Hedge Fund Index relative to the SPX down for the third month in a row. The month was also driven by another fall in pure beta vs pure profitability as investors were repositioning for lower inflation but a higher risk of a recession. With the sharp move lower in rates, especially in IG yields, and continued strength in payrolls, we believe investors will be able to put money back to work in the coming months. This could provide an environment that historically has been good for fundamentally driven dispersion.

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Important disclosures: Disclosures: This content (the "Insights Page") is provided by Weiss Multi-Strategy Advisers LLC ("Weiss"). The views expressed on the Insights Page are for informational purposes only and are subject to change without notice. Information on the Insights Page has been developed internally and is based on market conditions as of the date of the original post on the Insights Page from sources believed to be reliable. Nothing on the Insights Page should be construed as investment, legal, tax, or other advice and should not be viewed as a recommendation to buy or sell any security or adopt any investment strategy. Past performance is no guarantee of future results. Please consult your own advisers regarding business, legal, tax, or other matters concerning investments. Weiss has no control over information at any external site hyperlinked on the Insights Page. Weiss makes no representation concerning and is not responsible for the quality, content, nature, or reliability of any hyperlinked site and has included hyperlinks only as a convenience. The inclusion of any external hyperlink does not imply any endorsement or ongoing monitoring by Weiss of any hyperlinked site. Investing in securities is speculative and involves substantial risk of loss.

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