Equity markets: Cyclicals take a hit
Global equities fell in November. The downward movement in stock markets was seen at the end of the month. The energy sector was the worst performer, with oil suffering its biggest monthly decline since March 2020. Financial stocks also declined, and airlines suffered from the latest Covid concerns. The technology sector was the best performer thanks to gains in Apple and semiconductors, while cloud-related stocks lagged.
Major indices fell more than 2% on the Friday after Thanksgiving on fears that the emergence of a new strain of the virus could derail the economic recovery. While more details on the transmissibility, virulence, and resistance of Omicron's vaccines will have to wait at least two weeks, selling pressure picked up at the end of the month following statements by Moderna's CEO. He said current vaccines would be less effective against the variant. He also said it would be months before vaccine manufacturers could produce new Omicron-specific vaccines on a large scale. However, health officials have widely emphasized that vaccines should continue to offer some level of protection, especially against severe disease. Even before Omicron made news at the end of the month, the increase in new infections (particularly in Europe) weighed on investor sentiment.
On the fiscal policy front, the House of Representatives passed the approximately $1 trillion infrastructure plan, as well as the $1.75 billion "Build Back Better" social spending plan. However, Senate approval of the latter remains complicated. Finally, the third-quarter earnings season continued throughout the month. The results were quite positive, particularly concerning resilient profit margins and robust demand.