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In October, global equity markets continued their descent, with the MSCI ACWI posting another 3% decline this month. This extends the cumulative downturn to over 9% in the last three months. Despite this, positive performance earlier in the year has kept the index at a favorable +10% year-to-date (YTD). From a regional perspective, the downturn affected all markets, with Canada (-5.7%) leading the decline while the US (-2.7%) outperformed, while other regions performed similarly, recording a -4% decline.
The trends observed entering Q3 persisted in equity markets, notably with Quality stocks outperforming across all regions during the downturn. Surprisingly, every region, except Europe, favored Quality equities over Volatility, Growth, and even Value, contrary to Value stocks’ typical outperformance during downturns.
Inflation remains persistently higher than central banker’s target rates exhibiting slow-receding trends in some regions while holding steady in others. Notably, core inflation in developed countries has begun to recede, suggesting a slow normalization in prices outside of the food and energy sectors.
Yields continue to rise following increases in the federal funds rate. The US 10-year yield reached 4.77% in October, with the 10-year GILT reaching a high of 4.558%. Although long-term German yields increased as well, they remained nominally smaller than their English counterparts at 2.8%.
After a brief spike to $90/barrel in September, crude oil retreated to $80/barrel in October. Despite this dip, prices remain elevated compared to the year’s earlier average of $70/barrel. Rising conflicts in the Middle East pose potential uncertainties for oil prices in the remaining months of Q4.
Natural gas prices increased to $3.4/MMBtu from $2.9/MMBtu as winter demand surged. However, this is significantly below the levels observed due to the demand for gas in Europe resulting from the Russian-Ukrainian war, which saw prices remain elevated even throughout the summer months in 2022 up to $9/MMBtu.
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