October Monthly Market Review

In October, global stock markets seemingly broke out of their narrow trading range to end the month on a high note. The index tracking developed global markets rose 3.4% in GBP terms. Investors appeared to push aside the ‘wall of worries’, including fears over interest rate policy tightening, higher commodity prices, profit margin pressures, the resurgence of the Delta variant and regulatory changes in China.

Perhaps the underlying reasons for this optimism were a combination of generally better than expected third quarter company earnings (despite some individual disappointments, especially amongst the US mega techs). While we have seen economic data retreat from post-pandemic highs, this still provides an overall positive backdrop longer-term.

In equities, US markets, specifically technology shares were the month’s strongest gainers with the tech-heavy Nasdaq up 5.5% and the S&P gaining 5.3% in GBP terms. Bonds were a mixed bag, with Gilts up 2.2% while global bonds were 1.9% lower. Overall, bonds and gold remain in negative territory on a year-to-date basis. Gold’s near 6% loss in 2021 has left some commentators surprised, given its traditional inflation-hedging role and the above-target inflation readings this year. Some have suggested the puzzling performance can be explained by investors viewing cryptocurrencies like Bitcoin as providing a better inflation hedge – and we are not entirely surprised by this given we refer to cryptos internally also as ‘gold for geeks’.

Oil has continued its upwards momentum, gaining 5.2% in October. For context, while oil prices have now more than doubled over the last 12 months and are now back to where it last traded between 2010 and 2014, forward prices for oil delivery next year indicate market expectations for prices not to remain at these elevated levels beyond the winter months.

Investors still have the second half of third-quarter corporate earnings (profits) reports to digest, but based on the results so far, further reassurance could be coming. That’s not to say investors should be complacent, however, as the prospect of rising yields or a COVID driven declining economic outlook may still create tense moments that need closely watching as we head towards year-end.

Asset class returns at 29th October 2021

Important Information

The text is taken from The Tatton Weekly and is provided by Tatton Investment Management. The information in this document does not constitute investment advice or a recommendation for any product and investment decisions should not be made on the basis of it.

Tatton is a trading style of Tatton Investment Management Limited, which is authorised and regulated by the Financial Conduct Authority. Financial Services Register number 733471. Tatton Investment Management Limited is registered in England and Wales No. 08219008. Registered address: Paradigm House, Brooke Court, Wilmslow, Cheshire, SK9 3ND.

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