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Investors on Monday took some of their profits from the best month for stocks in decades, in which Covid-19 vaccine breakthroughs lifted economically sensitive sectors such as energy and financials.

The FTSE All-World was down 1 per cent in the final trading session of November, but the index has climbed more than 12 per cent this month, its best since at least 1994.

The UK’s FTSE 100 share index, which closed down 1.6 per cent on Monday, was still 12 per cent higher for November, in its best performance since 1989.

Wall Street’s leading benchmarks reached record levels in previous sessions and have posted double-digit gains for the month. Despite the 0.5 per cent fall by the S&P 500, the index finished 10.8 per cent higher for November. The Nasdaq Composite has gained 11.8 per cent for the month. Both indices notched their best performances since April.

The performance of US small-cap companies as measured by the Russell 2000 has been particularly buoyant, reflecting their sensitivity to the US economy. That index was up 18.3 per cent this month, the largest gain in the index’s 41-year history.

The outperformance of “small vs big” was an indicator of investors’ optimism going into 2021, said Timothy Holland, global investment strategist at Brinker Capital. This has been the month that a string of Covid vaccine trials produced positive results, and Pfizer and Moderna submitted their products for approval, raising the prospect vaccinations could begin very soon and ramp up quickly next year.

Small-caps “tend to be more volatile, more dependent on capital and more economically sensitive, and their performance shows that investors are pricing in better economic times”, Mr Holland said.

Europe’s benchmark Stoxx 600 index closed the day down 1 per cent to end November with a 13.7 per cent gain.

The UK FTSE 100 has benefited from its relatively high concentration of economically-sensitive cyclical stocks, which have been popular since markets began looking ahead to economies reopening.

“Time to turn positive on the UK,” said Sebastien Galy, macro strategist at Nordea Asset Management, noting that the country’s stocks were lagging expected earnings and that weakness in the pound against the euro should provide support.

Shares in natural resources, financial services and household goods companies make up almost half of the FTSE by weighting — a sharp contrast to the US S&P 500, which is dominated by the technology sector.

“The news on vaccines came out and you then saw this strong outperformance of cyclical stocks,” said Yuko Takano, equities portfolio manager at Newton Investment Management.

Markets were “taking a breather” on Monday “after a hard and fast rally showed some signals that equities were becoming overbought”, said Supriya Menon, senior multi-asset strategist at Pictet Asset Management.

Such signs, Ms Menon said, included the breakneck pace of investment flows into equity funds — amounting to a record $89bn across three weeks this month, according to Bank of America data.

Column chart of FTSE All-World index showing Global stocks heading for best month on record

But there might be more to come, she added. Pictet calculates that about $1.2tn rushed into the relative safety of money market funds between March and May, as the virus spread across the globe. About 75 per cent of that was still sitting in the low-risk funds, the manager calculates.

Dialled back expectations for a large fiscal stimulus in the US have helped keep yields on the 10-year US Treasury in check, said Tim Murray, capital markets strategist at T Rowe Price. The note yielded 0.844 per cent on Monday, marginally below the 0.874 per cent it yielded at the end of October.

Other haven assets continued to fall out of favour on Monday. Gold fell another 0.6 per cent to $1,776 per troy ounce. The metal has lost almost 6 per cent of its value in November, heading for its worst month in four years. The dollar rose 0.2 per cent to 91.98 against a basket of other currencies.

Brent crude, the international oil benchmark, fell 1.2 per cent to $47.59 a barrel after big oil-producing nations failed to agree on whether to delay a planned supply increase ahead of a crucial two-day Opec meeting starting on Monday.

Column chart of Gold price ($ per troy oz) showing Worst month for gold in four years

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