Like the weather the investment backdrop in October was largely gloomy and unsettled, with some of the biggest stock market falls seen since spring. The MSCI World Index fell by 3.0% with UK, US, European and Japanese markets all in negative territory (Source: Financial Express).
After some encouraging news in the summer, new lockdowns are set to curb the nascent recovery in UK and European economies. It looks like we are heading for “double dip”, with the final quarter of 2020 likely see a contraction in economic activity. But it is important to remember that markets look ahead and recent market falls are now pricing in a negative short-term economic backdrop. If, with some luck, there are any vaccine developments over the coming weeks, markets could see a santa rally and finish the year on a more positive note. Fingers crossed.
The most prominent investment theme in October was the strong performance of East vs West with Asia and emerging markets top of the leader board (Source: Financial Express). The key reason being the remarkable bounce-back in China where it is evident that they have managed to control the pandemic rapidly and effectively. A strong recovery in the Chinese economy has been highlighted by strong performance in the stock market and the MSCI China Index rose by 5.1% in October. Improving fortunes in China helped wider Asian and emerging market benchmarks produce positive returns in October and exposure to these markets is proving a good diversifier for investment portfolios (Source: Financial Express).
With the US presidential election around the corner, the world watches on as there may be a shift in power in the world’s most influential economy.
The information in this post is not financial advice, it is provided solely to help you make your own investment decisions. If you are unsure about whether an investment is appropriate for you, please seek professional financial advice. You can find more information here.
When you invest you should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future return.