Zip Co Ltd (ASX: ZIP) shares are off to a stellar start in November.
Shares in the All Ordinaries Index (ASX: XAO) buy now, pay later (BNPL) stock are up 5% in afternoon trade on Thursday, swapping hands for 31.5 cents apiece.
Adding in yesterday's 5.3% gain, and Zip shares are already up an impressive 11.1% on only the second trading day of the new month.
Here's what ASX investors will be considering in the month ahead.
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Headwinds and tailwinds for Zip shares
Zip shares received a big leg up (closing 6.7% higher) on 24 October after the BNPL company reported some strong quarterly results.
Highlights included an 11% increase in transaction volume to $2.3 billion and a 31.9% increase in quarterly revenue to $204 million.
Unfortunately for stockholders, Zip shares gave back most of those gains the following day, dropping 6.3%.
That rapid retrace was spurred, in part, by rising investor angst of another round of looming interest rate hikes. This came alongside mainstream analysis that global rates are likely to stay higher for longer than expected to tamp inflation back down to central bank target ranges.
Indeed, as we reported on 26 October, the top economists at all the big four S&P/ASX 200 Index (ASX: XJO) banks were forecasting that the Reserve Bank of Australia (RBA) will raise rates when the board meets next Tuesday.
BNPL stocks, like Zip, have proven highly susceptible to rising rates over the past 19 months. That followed a period of strong outperformance when central banks were cutting rates to historic lows after the COVID outbreak in 2020.
Indeed, Zip shares are down 97% since the company's February 2021 highs.
As for the strong performance so far in November, that also looks to be related to interest rates.
This time, investors appear to be taking heart from growing evidence that the US Federal Reserve may be done with its tightening cycle. Yesterday the Fed opted to keep rates on hold, boosting most growth shares.
While Zip shares may be impacted by company-specific developments in November, the big thing to keep an eye on is the outlook for Aussie and global inflation.
If the RBA unexpectedly holds fire next week, and inflation pressures look to be easing around the world, BNPL stocks should be among those to benefit.
