October Market Review
Many of the same macro forces that impacted September rolled into October, with war and election concerns being the main drivers of global markets. A definite air of uncertainty was reflected in the Vix closing the month +36.5% at 23.2.
War set the scene in the first week of the month, adding to the geopolitical uncertainty. Most significantly, Israel launched a ground offensive into southern Lebanon for the first time since 2006. This was followed by Iranian missile strikes, further Israeli retaliation and plenty of civilian and combat deaths. Further east, you also had China rattling its sabre over Taiwan as it conducted "fresh drills" around the island.
In the US, the run-up to the November presidential election saw Trump and Harris trade cheap blows. With no absolute dead cert, the election looks to be a closely fought affair. Ultimately, what a second presidency for Trump means for global markets is not clear, which only adds to the uncertainty.
Economic data during the month was varied, although the two major positives came in the final few days of the month. The first was the US gearing up for a soft landing, reporting solid growth of 2.8% in the third quarter. The second was China's PMI, which expanded for the first time in six months.
Despite the geopolitical uncertainty, equity markets held up reasonably well during the month, although on the final day, US stocks lost the October gains, and the S&P 500 closed the month -0.4%, while the Nasdaq was +0.1%. The FTSE 100 came under pressure during large parts of the month, and ultimately, the negativity surrounding Rachel Reeves' budget saw it close -1.5%. The Dax was also driven by negative sentiment, although more directed at the German economic malaise, and was -1.3%. In Asia, the Nikkei 225 had the strongest month, +3.1%, while China returned to its usual path after the exceptional performance of last month, with the Shanghai Composite Index -1.7%.
Oil dropped like a stone in the early part of the month due to a potential supply glut and Israel's statement that Iranian oil fields were not targets, but by the end of the month, WTI and Brent had more than recovered, closing +1.4% and +1.9%, respectively. Gold and silver had very strong months - gold has become the asset of choice as we head closer to the US elections, with the Financial Times describing it as the ‘FOMO asset class’ and by close of the month gold was +3.6% and silver +4.5%.
Digital gold likewise outperformed, with bitcoin +10.7% back up through $70,000 for the first time since June.