Data Source: Bloomberg
- Developed markets were moderately down in October partly in response to rising rate anxieties prompted by perceived shifts in global central bank policy and rising inflation expectations.
- Emerging markets continued to extend their leadership over developed as the region largely shook off rate anxieties and a stronger U.S. dollar.
- Uncertainty around ongoing support for global quantitative easing has led to a pullback in interest-sensitive assets such as precious metals, REITs, utilities/telecom, and fixed income debt. Bucking the trend in the bond market sell-off is high yield as investor appetite for credit risk remains strong despite rising interest rates.
- Following a rally at the end of the 3rd quarter, U.S. and European bonds renewed their sell-offs with the 10-year U.S. Treasury yield rising to 1.83% and the German 10-Year Bund yield rising to 0.17%. The Dollar Index Spot (DXY) rose to a YTD high of 98.45 with most of the gains realized in October.
- From a sector standpoint, there were few places to hide as only the financial sector (benefiting from the steeper yield curve) posted a meaningful positive return for the month.
- Could improvements in emerging markets export a whiff of inflation as the developed markets continue to find sustainable growth traction? Some strategists are now bringing up the dreaded stagflation scenario where rising costs depress future business activity.
To view full commentary, click here.