Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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October: the eye of the storm or are skies clearing up?
Market Rewind
Søren Otto Simonsen
Senior Investment Editor
Summary: The monthly market rewind for October is for the most part a good story. Equities got back into positive territory and especially the sectors performed strongly. Bonds continued to struggle. Whether the not-so-scary Halloween month is a sign of better things to come, or whether it was a chance to breathe before the storm hits again depends in large part on the central banks.
For the first time since June, global equities are in positive territory in our monthly market rewind, increasing by just above 7%. The positive performance comes on the back of an October dominated by the Q3 earnings season. And while some major companies – especially within tech – disappointed, the overall picture probably wasn’t as bad as some analysts had feared. At the same time, markets seem to hope that central banks, especially in the Western World, will ease up on interest rate increases, although this remains to be seen.
It’s clear that equity performance differs quite a lot based on the regions. The US and Europe led the way with gains of 8% and 6.1% respectively. Investors are hoping that both regions will see a bit of relief from the drastic tightening signalled by the central banks in recent months. This will provide better financial conditions for companies, which may be part of the explanation for the positive figures. The other side of the coin is that equities have fallen a lot this year and investors have priced in expectations of lower global financial growth and tighter central bank policy.
Asia and Emerging Markets fell 2% and 3.2% in October. Both regions have been challenged by Chinese real estate turmoil, as well as rising Covid-19 cases in the country. Simultaneously, the US Dollar remains strong (even though the US Dollar spot fell slightly in October, as you can see below), which generally puts pressure on Emerging Market economies.
Asia and Emerging Markets fell 2% and 3.2% in October. Both regions have been challenged by Chinese real estate turmoil, as well as rising Covid-19 cases in the country. Simultaneously, the US Dollar remains strong (even though the US Dollar spot fell slightly in October, as you can see below), which generally puts pressure on Emerging Market economies.
Equity sectors staged a surprising comeback as all were positive in October. The energy sector leads the pack with a 20% increase for the month on the back of a continued focus on the sector, due to the European embargo on Russian oil, an OPEC+ production cut and generally increased risk appetite. The industrials and financials sectors followed, as investors seem to increasingly return to more traditional sectors. Also, especially financials, and other consumer industries, are so far the winners of the Q3 earnings season in terms of revenue growth.
Information technology gained 7.6% despite disappointing earnings reports from the likes of Microsoft, Alphabet, Meta and Amazon. Apple proved to be a bright spot as the company maintained strong financials, which helped the positive performance of the sector.
Information technology gained 7.6% despite disappointing earnings reports from the likes of Microsoft, Alphabet, Meta and Amazon. Apple proved to be a bright spot as the company maintained strong financials, which helped the positive performance of the sector.
Bonds edged slightly lower in October. The general move back towards equities, as well as ongoing volatility and unanswered questions about central banks' path forward put a strain on the asset class.
Check out the rest of this month’s performance figures here:
Sources: Bloomberg & Saxo Group
Global equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific and EM respectively. Equity sectors are measured using the MSCI World/[Sector] indices, e.g. MSCI World/Energy. Bonds are measured using the the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st 'CL' Future). Gold is measured using the Gold spot dollar price per Ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK and CHF. Unless otherwise specified, figures are in local currencies.
Global equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific and EM respectively. Equity sectors are measured using the MSCI World/[Sector] indices, e.g. MSCI World/Energy. Bonds are measured using the the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st 'CL' Future). Gold is measured using the Gold spot dollar price per Ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK and CHF. Unless otherwise specified, figures are in local currencies.
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