November was not a kind month for the hedge fund community, a month in which global stocks started the month off poorly forcing many to load up on short positions, only to see another furious short squeeze into the end of the month, leading to another round of forced short squeezes (as previewed two weeks ago [9]) and leading many prominent asset managers to underperform (most notably perhaps David Einhorn who lost 5.2% in the month [10]and is down 20% for the year).
But was November, and 2015 in general, bad all around? For USD-based invetors (which these days is most of them), the answer is a resounding yes.
According to Deutsche Bank, the biggest highlight in November has been another poor month for commodities with Silver (-9.4%), Brent (-11.3%) and Copper (-11.6%) leading the decliners in the bank's global asset watch. US HY (-2.5%) has also been a notable under-performer as Energy sector woes and single name stories dominate. European HY (+0.5%) out-performed but the seeking of creditor protection from Abengoa towards the end of the month knocked a few tenths off overall performance. The best performers have been the DAX (+4.9%), the Nikkei (+3.5%) and the Russian Micex (+3.5%). Chinese equity markets also performed reasonably (Shanghai Comp +1.9%) over the month and were on course to be one of the strongest performers before that 5%+ collapse on the penultimate day of the month.
[11]
With just one month left in the year, the best performing asset class YTD now (on a local currency basis) is the Russian Micex (+32.2%) followed by a couple of peripheral European markets in the FTSE MIB (+22.8%) and Portuguese General (+16.9%) index. German equities have put in a strong performance also with the DAX up +16.1%, while in Asia it’s been a good year overall for the Nikkei (+15.0%) and the Shanghai Comp (+8.2%) – the latter of course not without plenty of volatility. At the other end of scale its commodities which dominate with Brent (-32.5%), Copper (-27.5%), WTI (-21.8%) and Wheat (-19.4%) some of the notable underperformers. Greek equities (-22.0%) are also worth a mention.
[12]
If we compare this to YTD returns on a USD basis, the big theme is the fact that very few global asset classes have gone up in Dollar terms this year. Russian equities (+15.6%) and the Nikkei (+11.8%) have been the notable outperformers while European credit is in double digit negative returns which is the case also for European sovereign bond markets. So in a world of a stronger dollar it's been very difficult to generate positive dollar returns in 2016. With so many dollar investors at a global level this surely has to have had a big impact on the mood of 2015 and confidence. With the Fed and the ECB about to diverge it doesn't look like momentum is going to change as 2015 turns into 2016.
[13]
Source: Deutsche Bank