Commentary
Markets begin the fourth quarter on a down note
Our October monthly market commentary.
Markets begin the fourth quarter on a down note
Global equity markets finished in negative territory in October as investors’ concerns about mixed corporate results offset optimism regarding generally better-than-expected economic data. Developed markets outperformed their emerging-market counterparts. North America was the best performer among developed markets in October due to strength in the U.S. The Nordic countries were the most notable market laggards, hampered mainly by weakness in Sweden and Finland. Additionally, Australia and Hong Kong led the downturn in the Pacific ex Japan region. The Gulf Cooperation Council (GCC) countries led the emerging markets for the month attributable mainly to Qatar and Kuwait, which posted relatively smaller losses. Eastern Europe was the primary laggard in the emerging markets due primarily to weakness in Turkey, Greece, and Poland. The poor performance of the Association of Southeast Asian Nations (ASEAN) resulted largely from a substantial market decline in Malaysia.1
Global fixed-income assets, as measured by the Bloomberg Global Aggregate Bond Index, declined 3.4% in October. High-yield bonds posted modest losses and were the strongest performers within the U.S. fixed-income market, followed by investment-grade corporate bonds, U.S. Treasurys, and mortgage-backed securities (MBS). Treasury yields moved sharply higher for all maturities of six months or greater. Yields on 2-, 3-, 5- and 10-year Treasury notes rose by corresponding margins of 0.50%, 0.57%, 0.54%, and 0.47%, ending the month at 4.16%, 4.12%, 4.15%, and 4.28%, respectively.2 The spread between 10- and 2-year notes narrowed from +0.15% to +0.12% over the month, and the yield curve remained positively sloped (longer-term yields exceeded shorter-term yields). A positively sloped yield curve generally indicates that the economy is expected to grow in the future.
Global commodity prices, as measured by the Bloomberg Commodity Total Return Index, declined 1.9% in October. The West Texas Intermediate (WTI) and Brent crude oil prices rose 1.6% and 1.5%, respectively, and the gold spot price gained 3.4% due to concerns about the escalation of the military conflict in the Middle East. The New York Mercantile Exchange (NYMEX) natural gas price fell 7.4% in October amid an increase in production and a decrease in demand attributable to unseasonably warm weather in much of the U.S. Wheat prices were down 2.3%, hampered by falling prices for Russian exports.
On the geopolitical front, Iran launched a large-scale missile strike on Israel on October 1 in response to Israel’s killing of Hezbollah leader Hassan Nasrallah in late September. Hezbollah is an Iran-backed Shia militia based in Lebanon and is designated by the U.S government as a Foreign Terrorist Organization. The Israeli government said that most of the roughly 200 missiles were either shot down or missed their targets, causing little damage. Late in the month, Israel retaliated by launching missile attacks on military targets in Iran.
1 All equity market performance statements are based on the MSCI ACWI Index.
2 According to the U.S. Department of the Treasury. As of 31 October 2024.
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