The last month was tough for markets with all major asset classes, aside from gold (+7%), experiencing losses. This saw global equities fall by 2.5% and commodities suffer most with a 5% drop. Bonds, on the other hand, were able to limit their losses to 0.7%. This ‘flat line’ from bonds has been a consistent theme throughout the year.
Regionally, a 4% fall in both the UK and Japan made them the worst performing regions. The US, on the other hand, was the best performing. Their fall of only 2% was despite Google and Tesla – two megacap stocks – experiencing a difficult month with falls of 3% and 17% respectively.
For fixed income, global corporate bonds underperformed government bonds. Meanwhile, currency markets saw significant movement, with the Yen depreciating by a further 1% and taking its year to date fall in value to 14%. The US dollar and the euro, however, managed small gains of 0.4% against sterling.
Once again, a major influence during October was the expectations on interest rates. For example, there was an assumption that interest rates in the US could stay higher for longer, which caused US 10-year bonds to reach levels not seen since 2007 at 5%. This assumption was fuelled by stronger than expected economic data coming from jobs, retail sales and GDP.
In contrast, European economic data was weaker with reported contractions in household and business sectors. Specifically, in the UK, higher interest rates coupled with sticky inflation negatively affected consumer confidence and retail sales.
China managed to provide a positive economic surprise with GDP, industrial production, and retail sales all reporting better than expected data during Q3. However, concerns surrounding their property sector and reports of US restrictions on AI chip exports to China influence investor sentiment.
Of course, if you have any questions about our latest market update, please do not hesitate to get in touch. Shorter term market movements such as those seen throughout October are accounted for, but if you would like to further discuss your financial plan, please contact your financial adviser.
— Aled Phillips
Chartered Financial Planner & Commercial Director
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The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.
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