Globally equity markets recovered strongly in November. In the US, the S&P 500 rose +8.9%, the Nasdaq increased 10.7%, whilst in the UK, the FTSE 100 was more muted, rising +1.8%. The key driver of the rally was data points showing cooling inflation, which in turn saw bond yields fall materially. The US 10-year bond rate declined -58 basis points to close at 4.26%. Its Australian counterpart fell +52bp to close at 4.41%. The weaker inflation data provided hope that the restrictive interest rate hikes of the last 18 months may be nearing an end.

In Australia, the All-Ordinaries Accumulation Index rose +5.2% in November. Top performing sectors were healthcare and real estate (a clear beneficiary of lower bond rates), whilst energy was the worst performing sector, driven by a fall in oil and gas prices. Positively for the fund, small cap stocks outperformed large caps as investor risk appetite improved with falling bond rates. Given the material underperformance of small cap stocks vs large caps in the last 18 months, we believe the next few years should be positive for the fund given its skew to small caps, where we are seeing quality companies across numerous sectors priced very attractively.