Knowledge Center Archive


November 2011 Market and Performance Update

  • Ongoing eurozone troubles and the failure of the U.S. Super Committee undercut the optimism witnessed at the end of October.
  • Equity and fixed-income markets declined, with risky assets among the weakest performers.
  • Losses were partially offset by month end as news of intended joint central bank action buoyed sentiment.

Global investments experienced a volatile month due to events in the eurozone and the U.S. Stock and bond markets generally witnessed declines in November, although some losses were recouped in the final days of the month. This late-month rally was driven by positive reactions to the announcement of combined action on behalf of some of the world’s leading central banks to help ease the spread of the sovereign debt crisis in Europe.

Economic Backdrop

Political change driven by troubles in the eurozone dominated headlines in early November. After failing to secure the confidence of his cabinet, Greek Prime Minister Giorgios Papandreou resigned. This was followed swiftly by the departure of Italian Prime Minister Silvio Berlusconi. New leadership in two of the region’s struggling economies, the lowering of interest rates in the eurozone and continued bond purchases by the European Central Bank failed to fully calm the markets.

November saw multiple credit-rating-agency downgrades within the eurozone. Early in the month, Standard & Poor’s (S&P) spooked market participants by falsely reporting a downgrade of French government debt. The announcement was quickly retracted, but caused a flurry of market activity nonetheless. Fitch Ratings downgraded the government debt of Portugal to below-investment-grade (following S&P’s downgrade in July), and the government debt of Hungary was also marked lower. Belgium’s government debt was downgraded, although it managed to retain its investment-grade status.

Further bad news continued to come out of the U.K. and the eurozone. Eurozone third-quarter growth was confirmed at only 0.2%, and showed no sign of improvement from the second quarter’s gross domestic product release (also 0.2%). Inflation in the region remained elevated and unemployment continued to rise, moving as high as 22.8% in Spain. While inflation in the U.K. declined in October, it still remained notably higher at 5.0% than the target of 2.0%. In addition, the country’s growth expectations for 2012 were revised lower from previous forecasts.

While some economic data released in November indicated that the outlook for the U.S. economy may be improving, positive news was partly overshadowed by concerns about the country’s budget deficit. The U.S. Joint Select Committee on Deficit Reduction, or the “Super Committee,” was set up in August as part of the country’s debt-ceiling agreement. The aim of the Committee was to establish a plan to reduce the U.S. budget deficit by $1.2 trillion within 10 years. The failure to achieve this goal by the November 21 deadline led to the announcement of a series of automatic spending cuts (which are scheduled to be implemented in January 2013) and caused further stock market declines.

Although U.S. third-quarter growth estimates were revised lower from 2.5% to 2.0%, there was some good news during the month. Inflation, as measured by the Consumer Price Index, fell to 3.5%, and retail sales recorded their largest rise in close to two years, driven partly by large numbers of purchases made on Black Friday. U.S. consumer confidence levels have also shown signs of improvement. The Thompson Reuters/University of Michigan Index, which is a measure of consumer confidence, reported a rise to 60.9 in October from 59.4 the previous month.

Globally, November ended on a positive note. The central banks of the U.S., the U.K., the eurozone, Japan, Canada and Switzerland announced a joint plan, which was scheduled to come into effect on December 5, to help shore up the world’s financial system. Under the program, commercial banks will be able to purchase U.S. dollars more cheaply, enabling them to access funds more easily. The news was welcomed by investors, and resulted in a market bounce in the final days of the month.

Market Impact

Global government bonds performed best in November. Corporate bonds struggled in comparison, and high-yield bonds also fell out of favor. Emerging-market debt held up comparatively well during the month. Within government bonds, demand for traditional “safe haven” issuers, such as the U.S. and the U.K., improved, but declined for struggling eurozone nations. As a result, yields for these countries’ government bonds, particularly Greece, rose for the month.

Global equity markets faltered in November, and many of the gains witnessed in October were reversed. Risk aversion rose; consequently, defensive sectors were favored. Consumer Staples, a sector comprised of “essential” purchases such as food, beverages and household items, was the only area to end the month in positive territory. After briefly rebounding in October, the cyclical Financials and Materials sectors once again led the decline. Banks that were directly impacted by the eurozone crisis weighed on returns within Financials.

Index Data 

  • The Dow Jones Industrial Average index gained 1.18%. 
  • The S&P 500 Index lost 0.22%. 
  • The NASDAQ Composite Index dropped 2.18%. 
  • The MSCI AC World Index fell 2.99%. 
  • The Barclays Capital Global Aggregate Index declined 1.75%. 
  • The Chicago Board Options Exchange Volatility Index (VIX), a measure of implied volatility in the S&P 500 Index that is also known as the “fear index,” fell from 29.96 to 27.80 during the month, but climbed as high as 36.16 on November 9. 
  • WTI Cushing crude oil prices, a key indicator of movements in the oil market, rose from $93.19 a barrel at the end of October to $100.36 by November 30. 
  • The Japanese yen strengthened against most currencies in November, while the euro weakened. The U.S. dollar fell marginally against the Japanese yen, but gained against the euro and sterling. The U.S. dollar ended the month at $1.57 against sterling, $1.35 versus the euro and at 77.63 yen.

Portfolio Review

SEI’s equity portfolios were roughly flat due to varied macroeconomic events that caused markets to drift downward for most of November before sharply rallying at month end. In large-cap equity, solid stock selection within Information Technology and Health Care generated strong returns that were negated by subpar stock selection within the Industrials and Consumer Discretionary sectors. Small-cap equity saw favorable sector allocation modestly overcome by soft stock selection. In international equity, stock selection at the sector level was mixed, with strong results in Materials and Financials overcoming weak results in Industrials and Information Technology.

SEI’s fixed-income portfolios also posted lukewarm performance numbers in November. In core fixed income, an overweight to agency mortgage-backed securities was a positive contributor due to security selection, but an overweight allocation to Financials detracted as spreads widened. An allocation to collateralized loan obligations in high-yield bond added to performance as prices outperformed the high-yield market after underperforming in October. In emerging-markets debt, exposure to corporate debt in Kazakhstan and Russia suffered due to the trading nature of select lower-quality securities in times of volatility.


  • Stock Selection in Large-Cap Equity – specifically within the Health Care and Information Technology sectors 
  • Industrials Sector Holdings in Small-Cap Equity – a favorable overweight to capital goods proved to be beneficial 
  • Country Allocation in International Equity – an overweight to Canada and underweight to Pacific ex-Japan contributed to performance
  • Local Currency Bonds in Emerging-Markets Debt – these helped mitigate the impact of currency depreciation


  • Value Managers in Large-Cap Equity – their picks in Energy and Financials detracted from performance 
  • Consumer Discretionary in Small-Cap Equity – due to unfavorable exposure to securities in the consumer services and retail segments 
  • Value Bias in International Equity – value underperformed growth in Europe, Australasia and Far East Index 
  • Basic Industry Selections High-Yield Bonds –specialty chemical companies were particularly troublesome

Manager Positioning and Opportunities

SEI’s portfolio managers use solid investment-manager selection and portfolio construction in an attempt to deliver diversified sources of excess return for our portfolios. In large-cap equity, managers have maintained overweights to Information Technology and Consumer Discretionary because they believe an attractive opportunity set is still present in these areas. In small-cap equity, the largest underweight position continues to be the Financials sector, in which the portfolio is light in banks and real estate investment trusts. International equity managers have increased the overweights to Materials and Telecommunications, while reducing the overweights to Industrials, Information Technology and Materials.

In investment-grade fixed income, managers are overweight the Financials sector as spreads remain wide and fundamentals continue to improve, with bondholders benefitting from new financial regulations. High-yield debt managers still prefer collateralized loan obligations due to improved fundamentals, better liquidity and because the technical state of the market remains favorable. In emerging-markets debt, managers continue to build their portfolios not to avoid any macroeconomic shocks, but to capture the medium- to long-term view of the asset class while remaining aware of macroeconomic risks.

Our View

In light of the uncertainty and recent pain, we no longer favor stocks over bonds, but rather have a neutral perspective. Although the economic outlook has been downgraded by economists, the data, in our opinion, still supports a positive view of overall business activity in the U.S. The European core nations are struggling, but do not yet appear to be in recession. Developing markets have also seen a notable slowdown in growth. U.S. equities are expected to benefit from continued earnings growth and exceptionally low valuations. We favor high-yield bonds over Treasurys and investment-grade debt. High-yield bonds appear priced for a recession that we do not think will materialize. We remain neutral to emerging-market debt and equity.


This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. There is no assurance as of the date of this material that the securities mentioned remain in or out of SEI Funds.

For those SEI Funds which employ the ‘manager of managers’ structure, SEI Investments Management Corporation (SIMC) has ultimate responsibility for the investment performance of the Funds due to its responsibility to oversee the sub-advisers and recommend their hiring, termination and replacement. SIMC is the adviser to the SEI Funds, which are distributed by SEI Investments Distribution Co. (SIDCO). SIMC and SIDCO are wholly owned subsidiaries of SEI Investments Company.

To determine if the Funds are an appropriate investment for you, carefully consider the investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses, which can be obtained by calling 1-800-DIAL-SEI. Read them carefully before investing.

There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments.

Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.

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