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Top ETF Stories of November: Spotlight on Election & OPEC

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The month of November was special with two high-profile events, namely the U.S. presidential election and the OPEC meeting on output freeze decision. In fact, the outcome of these two events can prove to be real game changers for the rest of this year and even the next.

In any case, a consensus carried out from 1950 to 2014 shows that November ended up offering positive stock returns in 43 years and negative returns in 23 years, per, with an average return of 1.35%.

This year, the month brought about 4.1% gains for the S&P 500, 6% for the Dow Jones Industrial Average and about 3.3% returns for the Nasdaq composite, even after four consecutive days of losses on election uncertainty in the beginning. Let’s take a look at the key events of the month that pulled the strings of the market movement.

Trump Win in Election & Ensuing Rally in Stocks

U.S. President-elect Donald Trump’s unexpected victory over Clinton was presumed to shock the global market thanks to his uncertain or rather controversial trade, immigration and geopolitical policies.

Market futures started moving in that downing direction initially, but eventually went on a rallying mode on Trump’s pledges for fiscal stimulation which in turn increased inflationary expectation and pushed up bond yields (read: Trump Triumphs: Stocks & ETFs to Rock or Shock).

Some specific sector ETFs soared extremely higher to touch 52-week highs on Trump’s policy agendas. These include industrial ETFs like First Trust RBA American Industrial Renaissance TM ETF AIRR, financials ETFs like SPDR S&P Regional Banking ETF KRE, defense ETFs like SPDR S&P Aerospace & Defense XAR and materials ETFs like PowerShares S&P SmallCap Materials PSCM (read: Sector ETFs Hitting 52-Week High on Trump's Victory).

Dow Jones Crossing 19,000 Mark

The Dow Jones industrial average was on cloud nine, having crossed 19,000 for the first time in its 120-year history on November 22. Not only Dow, the other two key U.S. equity gauges — the S&P 500 and NASDAQ Composite — also hit record highs in the month.

With republicans taking control of both the House and Senate, Trump is expected to enact all his market-friendly policies seamlessly. The industrial sector deserves a special mention on the president-elect’s plans of increased infrastructure spending. Beneficiaries of the surge in Dow were SPDR Dow Jones Industrial Average ETF DIA and iShares Dow Jones U.S. ETF IYY (read: Can Dow ETFs Stay on the Record Breaking Path?).

Small-Caps on a Tear

The Trump rally was mainly beneficial for small-cap stocks leading the Russell 2000 to log its ‘longest rally in two decades.’ A 13-year high greenback and the upbeat U.S. economic momentum gave way for small-cap stocks and ETFs to excel. These stocks have less foreign exposure and are thus less perturbed by negative currency translation (read: ETF Winners & Losers as Dollar Hits 13-Year High).

Plus, Trump’s plan to put America first and market speculation of higher domestic job creation went in favor of small-cap stocks. Small-cap ETFs like iShares Russell 2000 IWM was thus a winner in the month (read: ETF Asset Flow in Election Week).

Bond Market Rout

The dream run of the 30-year-old bullish bond market finally seems to be approaching its end. Both Trump and the Fed boosted Treasury yields in November causing a crash in bond prices. Fed chair Yellen lately fueled speculation about a sooner-than-expected rate hike. With almost 100% chance of a December hike, the yield on benchmark U.S. Treasury note jumped to 2.37% on November 30 from 1.83% at the start of the month (read: Tackle Trump & the Fed with These Cyclical Sector ETFs).

U.S. treasury bond ETFs like Vanguard Extended Duration Treasury ETF EDV, PIMCO 25+ Year Zero Coupon US Treasury ETF ZROZ and iShares 20+ Year Treasury Bond ETF TLT lost considerably (read: Is the Treasury Bond ETF Rally About to End?).

Oil Output Curb Deal Finally Done

Coming to the oil patch, the much-awaited deal on output cut was signed by the OPEC on November 30. OPEC will slash production by about 1.2 million barrels a day by January. The agreement excluded Nigeria and Libya, but enacted a quota on Iraq for the first time since the 1990s. Iraq has agreed to reduce output by 210,000 barrels a day from October levels while the OPEC powerhouse Saudi will decrease daily production by 486,000 barrels to 10.058 million barrels.

The deal sent oil and energy stocks and ETFs soaring with United States Oil USO adding about 8.7% and United States Brent Oil (BNO - Free Report) climbing about 9.1%. The largest energy ETF Energy Select Sector SPDR ETF XLE jumped 5.1% on November 30.

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