Market Review - October, 2022
Source: Zephyr Style Advisor
In October, the developed market equities market saw its first positive monthly return since July. The rally came amid mixed earnings from the tech giants that dominate US equity market index performance and a stronger-than-expected initial estimate of third-quarter economic growth (GDP), which rose 2.6% after two prior quarters of contraction. US equities led the way, returning 8.1%, followed by international developed equities returning 5.4%. Emerging markets declined 3.1%, with China falling 16.8%. China's losses stemmed from changes in political party leadership, hitting internet companies especially hard.
All sectors in the S&P 500 saw positive performance for the month. After a difficult September, Energy surged 25% in October and remains the only positive sector for the year, with a 68.6% return. OPEC+'s decision to cut oil production and the ongoing Russia-Ukraine war continue to pressure the global energy supply. Industrials and Financials followed Energy as the second- and third-best performers, while Consumer Discretionary and Communication Services were the worst performers. For equity size and style, October provided consistent themes with small caps outperforming large and value stocks continuing their outperformance over growth.
Bond markets were mostly negative for the month as central banks continued with interest rate hikes with two notable exceptions. US high-yield bonds gained 2.6%, and inflation-protected TIPS gained 1.2%. The US dollar took a breather and weakened slightly in October, declining 0.4%, but its year-to-date gains continue to be a major headwind for international investments.
The Global 60/40 portfolio gained 3.4%, falling squarely between global equities and bonds, unlike previous months where the balanced approach offered little relief. REITs were positive but underperformed broader equities and are still the second-worst-performing asset class behind emerging market equities for the year. Broad commodities gained, helped by energy and grains for the month, and remain one of the few positive investments for the year. Gold continued to struggle and fell 1.6% for the month, remaining negative for the year despite ongoing inflation concerns.
Source: Zephyr Style Advisor
