Sabco® Investment's Monthly Market Report - October, 2023

Sabco® Investment's Monthly Market Report - October, 2023

In October, global stocks declined due to concerns that U.S. interest rates might stay elevated in response to persistent inflation. Tensions in the Middle East also caused unease among investors, contributing to a fall in bond prices and a rise in yields. Conversely, gold prices increased as it became a favored asset for those seeking stability.

U.S. markets experienced a downturn as the anticipated timeline for the Federal Reserve to ease its monetary policy was extended due to enduring high inflation and a strong economy. Conflicts in Ukraine and the Middle East added to the uncertainty.

The U.S. economy grew faster than expected in Q3, driven by robust consumer spending. Inflation remained steady, and industrial activity expanded slightly. Despite these signs of strength, the Fed hinted at the possibility of continued policy tightening to combat inflation.

Energy and consumer discretionary sectors saw significant declines in the U.S., while utilities and consumer staples were more stable. In Europe, stocks also fell, with healthcare suffering after a major pharmaceutical company lowered its profit forecast. However, the ECB paused its rate hikes, and inflation showed signs of easing, potentially signaling an end to the cycle of rate increases.

UK markets were negatively affected by rising interest rates, leading to declines in lending and property sectors. Economic indicators suggested a worsening outlook, highlighted by falling consumer confidence and housing prices.

In Japan, equity markets fell, but financial stocks benefited from rising yields. The BOJ modified its yield curve control policy in response to rising inflation expectations and a weaker yen.

Asian and emerging markets struggled, with geopolitical tensions and interest rate concerns leading to broad sell-offs. China's growth slowdown and ongoing real estate issues dampened investor sentiment, while some emerging markets like Brazil saw marginal improvements.

Bond markets anticipated that interest rates might remain high due to factors like strong U.S. labor data and inflation. U.S. yields rose, and while the ECB held rates steady, European yields generally fell. The UK's economic data was disappointing, causing yields to rise.

Credit markets saw widening spreads for investment-grade bonds, indicating underperformance, while high-yield bonds also suffered losses. Convertible bonds were affected by the weak equity market, and commodity markets were mixed with gains in precious metals and agriculture but declines in energy and industrial metals due to Middle East tensions and supply risks.