October was another testing month for investors. Things came to a head during the last week with the US election looming and European countries succumbing to a second wave of Covid-19. Governments imposed tighter restrictions in many countries, including a second national lockdown in England. Equities bore the brunt, with European markets, not surprisingly, hardest hit. The German DAX was off 9.4 per cent, the Italian MIB, down 6.5 per cent and the CAC 40 shed 4.4 per cent. In the US, the S&P 500 fell 2.8 per cent and the Nasdaq was down 2.3 per cent.
Although equity markets gave up some of the previous months’ gains, underneath the surface it looked like optimism about the outlook was improving. US Treasuries sold off (yields rose), suggesting fears of a deflationary slump were waning. To back that up, commodities, except for oil, were strong. Copper rallied to its highest price in over two years, and nickel and zinc were up 4.5 per cent and 4.8 per cent, respectively. Although the leading indices gave up ground, smaller companies and value stocks generally did better. In the US the Russell 2000 was up 2.3 per cent, and in the UK the FTSE Aim was off only 1.1 per cent, while the FTSE SmallCap index gained 1.1 per cent. One last straw in the wind was China, where the economy is thriving again, the FTSE China Index was up 1.0 per cent.
Brent crude was off 10 per cent to $37.90 per barrel on 31 October on worries that European lockdowns would impact demand. Gold gave up 1.0 per cent, but Bitcoin seems to be on another run, gaining 25 per cent.