z-kolkiemz-kolkiem

October’s investment market commentary

October was a mixed month for markets, with two main detractors and one big plus we would like to highlight.
Published 4 November
2 mins

The detractors were inflation concerns, which put downward pressure on bond prices, and uncertainty coming from China, in the form of regulation and Evergrande (China’s largest property developer).  This put downward pressure on emerging markets in particular.

On the plus side, corporate earnings growth was strong during the third quarter, despite lingering supply and demand issues.  Growth in earnings is important because equity valuations are quite fully priced, so this growth addresses the earnings side of one of the most commonly used metrics: the price / earnings ratio. In fact, of the 299 companies that had reported for the S&P500, 81% have posted better-than-expected earnings and 67% have surprised on the upside in terms of revenue. The sectors that beat Q3 profit estimates the most were financials, energy and healthcare.

Global equity markets were positive (+5.0%), with emerging market equities (+0.9%) lagging developed markets due to contagion fears from the Evergrande saga. In terms of style, growth stocks (+6.1%) outperformed the more value orientated equities (+4.1%) . This was also reflected in sector performance with consumer discretionary and information technology among the best performing areas, while more defensive and, to some extent, more interest rate sensitive utilities and consumer staples lagged.

Within fixed income markets, concerns over inflation, rising commodity prices, and the expectation of faster interest rate rises meant most bond markets generated negative returns for the month. Looking at the detail, while global government bonds (-0.1%), global high yield (-0.7%) and emerging market local currency debt (-0.7%) all declined, global investment grade credit (+0.3%) managed to buck the trend.

In terms of real assets, property markets generated an equity-like return over the month with the global REITs index up +5.3% over the period. Commodities were all positive, with crude oil (+10.7%) up the most, providing further fuel to already high inflationary expectations.

We continue to favour equities over bonds, which are more sensitive to inflationary pressures.  This is a favourable environment for equities: even though interest rates may rise, this is from a very low base, as households have accumulated significant savings, governments are encouraging spending and we are yet to see the full spectrum of innovation which we expect as a result of the pandemic. Additionally, cash waiting on the sidelines to be invested remains high, so if equities were to sell off we anticipate this would be temporary.  Our preference remains for developed markets, particularly for pan-Europe, where economies are reopening and valuations are not as stretched (especially as compared to the US, although we can see pockets of opportunity within US small caps).

INDEXEND SEPTEMBER VALUEEND OCTOBER VALUE
FTSE 1007086.427237.57
DJ Ind. Average33843.9235819.56
S&P Composite4307.544605.38
Nasdaq 10014689.6215850.47
Nikkei29452.6628892.69
£/$1.34741.3682
€/£0.859290.84459
€/$1.1581.1558
£ Base Rate0.10.1
Brent Crude78.3183.72
Gold1756.951783.38

This month’s values quoted as at 29/10/2021. The above values are sourced from Bloomberg and are quoted in the relevant currency.

Clients of Nedbank Private Wealth can get in touch with their private bankers directly to understand how their portfolios are responding to market events or call +44 (0)1624 645000 and speak to our client services team.

 

If you would like to find out more about how we help manage clients’ investments, please also contact us on the number above. Or you can get in touch using the links to the forms towards the end of this page.

Investments can go down, as well as up, to the extent that you might get back less than the total you originally invested. Exchange rates also impact the value of your investments. Past performance is no guide to future returns. Any individual investment or security mentioned here may not be suitable, and is included for information only and is not a recommendation. You should always seek professional advice before making any investment decisions.

about the author

Tom Caddick

Tom Caddick

Tom was appointed in March 2021 and brings to the table over 20 years’ investment experience. Prior to joining, he was at Santander Asset Management in London for nine years, where he was, most recently, the chief investment officer for its UK business, having previously been the global head of the multi asset division. Tom also spent several years as head of multi manager and fund selection at LV Asset Management.

Tom sits within Nedgroup Investments, a sister company, which provides investment advice, research and portfolio modelling solutions to Nedbank Private Wealth. Here, he heads up the London-based investment team. It is in this capacity that he is a member of Nedbank Private Wealth’s investment committee.

Access more of our insights

Investing

Is environmental transition a new industrial revolution?

31 May

   |   3½ mins

Can sustainable investments offer sound financial returns as well as sound environmental practices in the fight against climate change?

Investing

The week in review

23 May

   |   4 mins

During the week of 15 May 2023, investor sentiment was buoyed by a more positive tone in the US debt ceiling negotiations. But continued tightness in labour markets prompted more hawkish comments from central banks on their determination to reduce inflation.

Investing

The week in review

16 May

   |   4 mins

The week of 8 May 2023 was a mixed week for markets. US equities and bonds advanced as investor confidence grew following better than expected inflation data. However, weaker data releases renewed fears of a slowdown and led to a risk-off sentiment.

Investing

April's investment market commentary

12 May

   |   3 mins

April was a quieter month for markets as attention focused on further rate increases, given stronger economic data and signs of more persistent inflation. Simon Watts explains.

Get in touch

If you are interested in becoming a client, please complete the form via the ‘become a client’ button below. Alternatively, if you are already a client, or if you have a question about how we help clients in particular circumstances, please use the ‘contact us’ button.


We will get back to you as soon as we can during office hours, which are Monday to Friday, 8am to 8pm (UK time), except for UK public holidays.

Become a Client

Thank you for your interest in Nedbank Private Wealth. Please call us on +44 (0)1624 645000 or complete the requested information and one of our team will get back to you soon. We look forward to speaking with you.  Please note: If you are an EU resident, we are unfortunately unable to offer our services to you at present.

* Required fields

Contact Us

Please call us today on +44 (0)1624 645000. Our office hours are weekdays from 8am to 8pm (UK time), except for UK public holidays.

 

Or please complete and submit the below form and one of the team will get back to you as requested.

* Required fields

Search suggestions