Overall, markets had a positive month in October, with many major indexes building on strong gains for the year and reaching new all-time highs. Performance of some of the main indices over the month are highlighted below:
(All figures are based on bid to bid pricing with income reinvested, in Sterling terms)
Investors focused on the minutes from Federal Reserve Open Market Committee, who made it clear that tapering will likely take place despite the increase in the spread of the Delta variant and the recent disappointing US Jobs data. The minutes showed that most committee members believe that current employment would be sufficient to meet the substantial progress criteria for reducing its emergency asset purchase programme, which started at the beginning of March 2020. Investors anticipate that tapering is likely to begin Mid-November or Mid-December.
Inflation continues to be a major theme for markets, prices in the US surged to a 13 year high as inflationary pressures increased the cost of food, energy and rent. In the UK, prices rose by an average of 3.1% year on year for the month of September. The governor of the Bank of England stated that the Bank would ‘have to act’ to keep control of inflation expectations. Markets now anticipate that we may see a rise in interest rates before the end of the year from the record low of 0.1%.
In China, economic growth lost momentum, China’s gross domestic product increased at the slowest pace in a year. China’s economy only grew by 4.9% between July and September year on year. This was due to a slowdown in the property sector, energy shortages and an increase in coronavirus outbreaks, which led to more travel restrictions.
In summary, markets continue to trend higher despite the increase in COVID 19 cases. With many of the developed countries close to being fully vaccinated, major economies have been able to stay open and businesses continue to remain resilient. We are still confident that equity markets will continue to outperform in the long-term.
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