Market Overview |
Markets (prior week): SPX -2.68%, RTY -2.05%, NDX -4.91%, UKX -0.52%, SX5E +0.64%, SMI -0.10%, NKY -9.25%, TPX -6.48%, HSI +5.10%, Brent -16.7% to $97.97, Gold +5.06% to $4,071/oz, Silver +5.73% to $51.91/oz, Bitcoin -2.55% $75.8k, VIX +32% to 25.63pts (peaking Thursday at 28.36). |
Equities: Global equities experienced their most volatile week of the year, as investors digested a sweeping Democrat win at the US midterm elections (notably taking Texas, Georgia, Kansas). Initially markets reacted positively as Oil moved lower and Gold higher on hopes of resolution in Iran, and a lower forward on Rates. Markets then sold off heavily Thursday on fears the Democrats would slow data centres and slow AI growth; pushing the MSCI World to drop -2.5% and the Mag7 losing over $1Trn. Strong payrolls and dip buying helped drive a recovery on Friday to end a tough week on a positive note. US equities were the main driver of global price action, with an aggressive sell down across the whole AI / Memory complex pushing the NDX to -6% Thursday (4th largest 1 day loss since 2010). Outside of AI, we continued to see broadening strength in US earnings (last week saw beats rom Apple, Palantir and Amex) and robust labour markets with an upside surprise in US Payrolls (+165k vs. 48k est.). NDX finished -4.9% lower for the week, the S&P 500 fell 2.7%, and Russell2000 -2.1%. VIX spiked to 28pts (+32%) midweek to its highest level since the start of the Iran conflict. Europe generally avoided the steepest declines felt by US/Asian due to lower AI exposure and a rotation out of US, with Financials particularly benefitting. The STOXX Europe 600 was positive +0.24%, Germany’s DAX was flat, France’s CAC 40 Index added +2.13%, Italy’s FTSE MIB +1.12%. Whilst the FTSE gave back prior gains losing -0.52% as the BOE hiked 0.25% to 4.0%. In Asia, Japan saw the NKY fall sharply (-9% WoW) led by AI / Memory names and retail selling whilst the broader TPX fell 6.5%. Japan is now in a technical bear market, -20% since its June peak prompting the BOJ to potentially delay its Dec rate hike. (note: Futures rallied back c.2.5% this morning). Chinese equities rebounded from October’s losses, with the PBOC buying stocks and funds on Tuesday across 31 different vehicles for a total of RMB 100bn. The CSI 300 Index (onshore) gained +1.73% and the HSI (offshore) +5.1%.
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Other Key Markets: Energy markets saw US Crude (WTI) fall to its lowest level in 3 mths mid-week ($88) following the Democrat win and hopes of a more constructive ME approach. WTI finished the week -12% / $90.5 after creeping up Friday. Bond Markets saw yields fall again broadly across the curve for 5th week in a row; 10-yr UST yield fell 7bps to 4.86%, JG yields fell 15bps to 2.63% and Gilts yields fell 12bps to 5.15%. Precious Metals rebounded strongly on falling oil prices, renewed safe-haven buying and short covering in an oversold market. Gold up +5.06% to $4,071/oz, Silver gained +5.73% to $51.91/oz. Crypto markets sold off in-line with risk assets after an initial post-election rally. Bitcoin -3% and XRP -5%.
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Macro: · US: The key data release was US payrolls surprising to the upside (165k vs. est. 45k) ad the UE rate edged down to 4.1% (-0.1% MoM), whilst manufacturing remained strong (ISM Manufacturing PMI 55.5 vs 54.5 prior) and factory orders rose 1.8%. The ISM Services PMI fell 0.4 to 54.5 MoM. · Europe: Saw EU inflation accelerate to 4% (+0.2% MoM), led by energy inflation. Economic activity also slowed with the Composite PMI at 51.7 (-1.4 MoM) and Retail Sales fell 0.7% MoM. · UK: BOE raised rates (+0.25% to 4.0%, 1st time in 3 yrs) as inflation forecasts rebounded to 5% from the current 3.5%, with a 2nd rate rise potentially in Dec. · Japan: Saw the Yen rebound to 158.2 vs USD (157.5 prior week) and wage inflation hit 4.6% YoY above the 3.8% estimates. · China: The PBOC stepped up equity support with RMB100bn of buying during the week, while business surveys continue to highlight uneven economic activity with the private surveys continuing to signal expansion, albeit at a slower pace. |
Fundamentals This week look for Miners’ reporting (Barrick, Franco-Nevada), Energy names (Occidental, Petrobras, ENEL), Japanese financials (on Friday) and key names Cisco, Vodafone. Monday: Constellation Energy (CEG), KKR, Barrick Mining (B), Occidental (OXY), Ferguson (FERG), Skydance (after Paramount acquisition, SKYD), Take Two (GTA release news), Rocket Lab (RKLB) Tuesday: Petrobras (PBR), TransDigm (TDG), Honda, Alcon (ALC), Vodafone (VOD), Ecopetrol (EC), Coreweave (CRWV), Telefonica Brasil, Embraer (EMBJ), Sea Ltd (SE) Wednesday: Siemens Energy (ENR), Franco-Nevada (FNV), Vylor (VYLR), CGI (GIB),
Thursday: CISCO, Applied Materials (AMAT), Siemens AG (SIE), Allianz (ALV), Enel (ENL), Brookfield Corp (BN), Nebius Group (NBIS), Cerebras (CBRS) Friday: Mitsubishi UFJ (MUFG), Sumiomo Mitsui Fin Gp (SMFG), Mizhu Financial (MFG)
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The Week Ahead · Tuesday: US CPI – expect to moderate after strong Sep print. Est. +0.3% headline, +0.2% core. Risks are to the upside from discretionary services and AI-related goods. Fed Waller is speaking before the numbers drop. · Wednesday: US Veterans Day, US stock and bond markets closed. · Thursday: US home sales and weekly JOLTS employment data. · Friday: US PPI. |
Active Defined Returns Fund Highlights (‘DDR’)¹: The Fund returned –0.29% this week, showing strong resilience to the sharp falls across equity markets this week, benefitting from our recently increased buffered downside protection (vast majority of recent positions at -40% or -50% protection). The Fund has delivered predictable, consistent returns over 6 months (+4.0%) and 12 months (+8.7%), and we continue to outperform our peers over 12 months2 and are targeting 10%+ for the full year 2026. Equity markets seem set for a period of high turbulence, as AI concentrations unwind, presenting a challenge period for traditional equity investments. Active Defined Returns continues to benefit from structurally strong pricing conditions (higher vol and Gilt spreads) and resilience to downturns. Providing a compelling, more predictable allocation within Equities and Alts portfolios. The Fund is well positioned into the end of the year with over £60m recently invested as index levels moved lower in Sept/Oct, securing strong coupons and increased protection levels. The Fund is now £294m AUM with a strong pipeline to £300m. EQD defined return pricing remains strong, boosted by higher GILT yields, delivering coupons of approximately GILTs + 5%. One EQD position auto-called this week, generating a return of 8.75% for the portfolio. We continue to actively trade the portfolio, utilising market weakness to top-up £3.8m of existing positions this week, at yields materially higher than their contracted coupons (c.12%+). The EQD portfolio remains well diversified with 50 positions and a weighted average coupon of 9.74%. We added to our 2035 Gilt position (£7m) this week and our interest rate hedges continue to protect the portfolio from spread widening over the course of 2026. Core risk metrics remain robust, providing strong resilience to a downturn with a Cover-to-capital-loss at 36.1%. The portfolio provides strong funding in excess of SONIA +45bps and maintaining a money-wtd maturity of 6.75 yrs.
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Active Diversified Opportunities Fund Highlights (‘DDO’)¹: The fund returned -0.4% % in the week, with its diversified drivers working well against a highly volatile global market within risk assets. A Democratic Congressional sweep in the mid-term elections weighed on AI/chips and Defence while supporting Gold and Renewables. The BOE hiked to 4.00%, and Governor Bailey flagged a second hike as “more likely than not,” though Pill subsequently softened the tone. The Fund showed good resilience with the Gold sleeve being the dominant positive contributor. Offsetting declines in Korean AI linked names (primarily SK Square and Samsung C&T) and Defence stocks (Rheinmetall and LIG Defense). Biggest faller of the week was Fujikura (-24%) on concerns over AI spend. The company reports tomorrow and it will be interesting to see the results and ongoing commentary on demand, given prior conservative in releases. Biggest riser of the week was Applovin (+71%) on strong results that changed the narrative to one of renewed and confirmed expectations of strong returns and market share. This may be indicative of underpriced value in other areas of the portfolio. HDFC, Adyen and Lotto Matica all had good weeks while Agnico Eagle and Royal Gold led among the gold related stocks. Protection overlays came to the fore this week, as US markets fell our equity put protection ramped in value, and will increasingly offset any further equity market falls. In addition to the SPX put spread, we added a Nasdaq put spread at attractive levels before the market falls last week, and this increased our overall put protection to more than full cover of our overall equity exposure. Our bond and wider debt positions look well positioned as bond yields now continue to retreat from their highs and our alternatives and infrastructure exposures should also benefit if this continues. The equity positions look well placed at attractive valuations, with some looking oversold, with scope to provide attractive returns when the tide turns. The wider equity book is protected against a further fall in US equities after the significant crack in confidence last week. The fund looks priced at an attractive entry point in relative and absolute terms.
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1: Due to the forward pricing of UCITS Funds, the NAV does not relate to the exact same period as quoted for indices 2: Source Bloomberg on a 12 mth rolling basis, versus the WisdomTree Defined Returns Fund (B-class), and the Fortem Capital Progressive Growth Fund (A-class) All data is sourced from Bloomberg. To UNSUSCRIBE please send a request to joseph.catley@capelasset.com This material is provided for information purposes only and is intended for regulated financial advisers and professional investors only. It is not intended for retail clients and should not be distributed to or relied upon by retail investors. It does not constitute investment advice, a personal recommendation, or an invitation or inducement to buy or sell any investment. Any decision to invest in or recommend the fund should be made solely on the basis of the current Prospectus and Key Investor Information Document (KIID), together with independent professional assessment of suitability. Past performance is not a reliable indicator of future performance. Capital is at risk and investors may get back less than they originally invested. Issued by Capel Asset Management, 20 North Audley Street, London, W1k 6WE. Capel Asset Management Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 1057826). Registered in England and Wales (No. 17191384).
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