The month of October eventually turned out to be a positive one for most assets and portfolios. However, there were also a few wobbles and the first signs that the strong momentum in markets since late spring was perhaps beginning to lose some of its steam.
The source of the positive momentum came mainly from the corporate sector, which delivered generally strong outcomes during the third quarter reporting season.[1] The phenomena was not just restricted to the USA, with companies globally beating consensus expectations for profits. The resulting upgrades from analysts helped provide enough fuel for general ‘risk on’ sentiment in the equity market to remain at high levels. This sentiment was further underpinned by the resumption of interest rate cuts in the USA mid-month, and the ending of the Federal Reserve’s quantitative tightening programme.[2] Both actions acted to underpin the abundant liquidity flowing through the global financial system, a significant reason behind the strong returns year to date.
However it wasn’t all plain sailing. There was a notable intra month reversal in equity market direction catalysed by an increase in tensions between the US and China, a saga which waxed and waned before eventually calming down and settling into an uneasy truce.[3] Several company failures led to large scale losses in the US private lending market, putting investors on edge and causing the head of JP Morgan to remark that there is usually more than ‘one cockroach in the kitchen’ ( i.e. he feels that there will be more failures to come).[4] The gold price was also highly volatile during the month, with investors first celebrating a rapid climb to new record highs, before enduring an uncomfortably sharp and rapid retreat from those highs.[5]
