Market Review - October 2021
Source: Zephyr Style Advisor
October was a strong month for equities, following a tough September. Despite ongoing concerns about supply chain disruptions and inflation, strong Q3 corporate earnings lifted the US stock market to reach new all-time highs¹. US equities led the way returning 7.0%, followed by developed international and emerging markets, returning 2.5% and 1.0% respectively. Brazil, whose central bank recently raised interest rates², continues to be a major drag in emerging markets, returning -9.4% for the month and -19.6% for the year. On the other hand, Chinese equities rebounded in October and were up 3.2% but remains negative (-14.0%) for the year. For the year, it’s notable that a strong US dollar has erased sizable gains for developed international equities which in local currency is up 17.2% year- to- date versus 11.5% in US dollars.
Looking into the US equity market, all eleven S&P 500 sectors were positive for the month. Consumer Discretionary and Energy had stellar performances returning 10.9% and 10.4% in October. Energy is now up a whopping 58.1% year to date, with financials following as the next best sector at 38.6%. Looking across size and style, large cap growth stocks outperformed small cap value stocks, a reversal from September.
Bond returns were relatively flat across the global markets. The US fixed income market returned 0.0% in October. Long Treasuries performed well, up 1.9% as the 30-year yield fell, signaling potential concerns about longer-term economic growth. Treasury Inflation Protected Securities (TIPS) also performed well, up 1.1% as inflation rose higher than expected. International and emerging market bonds were slightly down for the month, both returning -0.4%. For the year, international bonds have struggled and remains negative (-6.3%) as inflation concerns abroad have caused interest rates to rise faster than the US bond markets.
The commodity index continued to rally during October, returning 2.6% for the month and is up 32.5% for the year. Gold reversed course and rose 1.5%, as the US Dollar fell by 0.2%. US REITs returned 7.1% during the month, bouncing back from a decline in September. All major real estate sectors were positive for the month, and US REITS are now up 30.2% year to date.
Relative to a globally balanced (60/40) equity/bond index, allocations to global equites and US REITs helped while commodities, global bonds and gold hurt for the month.
Source: Zephyr Style Advisor
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