As Investors Await Fed Rate Cuts, Global Stocks Are Poised for Their Best Month in More Than 3 Years

November has proven to be a highly favorable month for investors, extending its positive impact beyond those predominantly holding U.S.-traded stocks. A global resurgence has been witnessed across various markets, including China, Latin America, and beyond, propelling one of the most widely followed benchmarks of international equity performance, the MSCI All-Country World Index, to the brink of its most remarkable month in over three years.

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According to FactSet data, the MSCI All-Country World Index, encompassing shares of nearly 3,000 companies traded in 23 developed markets and 24 emerging markets globally, has surged by 7.6% in November. This marks the most significant monthly gain since April 2020 when the index experienced a notable 10.2% increase, rebounding from the shock induced by the COVID-19 pandemic.

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The rebound rally in November has been a global phenomenon, reaching into previously overlooked segments of the market, such as U.S. small caps and Chinese stocks. Despite facing economic challenges in 2023, Chinese stocks seem to have found stability this month, with the Shanghai Composite Index showing a 0.7% increase, having declined in five of the past seven months.

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Beyond China, other emerging-market stocks have experienced robust gains, driven in part by a depreciating U.S. dollar and additional interest-rate cuts from select central banks. The iShares MSCI Emerging Markets ETF, tracking an index of emerging-market stocks, has surged by 7.7% in November, poised for its most impressive month in a year.

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European stocks are also showcasing their strongest performance since November 2022, with the STOXX Europe 600 index rising by over 6%. Similarly, the MSCI ACWI ex-U.S. index, illustrating global market performance excluding the U.S., has climbed by 8.1%. This index is predominantly influenced by Japanese and U.K.-traded stocks.

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Japan's Nikkei 225, the primary Japanese benchmark, is on course for its most exceptional month in three years, boasting an 8.9% gain so far in November. Japanese stocks have garnered attention for surpassing their U.S. counterparts in U.S. dollar terms.

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While 2023 has been a positive year for stocks overall, the driving force behind the market's November gains is a subject of analysis among stock-market analysts. The Federal Reserve and expectations for interest rates appear to be key factors. Falling Treasury yields have further fueled stock demand.

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Steve Sosnick, Chief Market Strategist at Interactive Brokers, attributes the strong global stock performance to diminishing concerns about the Gaza situation, expectations surrounding the Federal Reserve, and a natural rebound after three months of declines. Sosnick emphasizes the market's reaction to signals from the Federal Open Market Committee and Chair Powell, coupled with indications of easing employment pressures. Confidence in global equities has also been bolstered by reassuring developments, including China addressing its property crisis and signs that the Gaza situation is not escalating beyond the region.

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In conclusion, global stocks gained 0.1% on Friday, according to the MSCI All-World Index, while the S&P 500 also recorded a 0.1% gain, concluding at 4,559.34. The positive trajectory in November underscores the resilience and optimism prevailing in the global financial markets.

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