The benchmark indexes were up again in October. The tech heavy Nasdaq continued its upward climb, rising 3.6% for the month. The S&P 500 was up 2.3%.
The Dow was up 4.4% for the month. Synchronized global economic growth, combined with a weaker U.S. dollar and rebounding commodities prices, have helped Dow components post quarterly profits that have so far outshone results in the broader S&P 500 index of large U.S. companies.
We expect inflation to remain low. Factors such as demographics of an aging population, the displacement of labor by new technologies and the trend towards growing populism around the world will keep inflation at bay in the long run.
Earnings growth was strong in the U.S. in the first half of the year, but is beginning to slow. Earnings expectations will be hard pressed to accelerate given low economic growth and inflation levels.
A shift toward global monetary policy normalization is likely to reduce the liquidity growth stimulus. This shift would likely reduce support for global asset prices.
International markets also rose in October, with the MSCI All Cap World Index up 1.89%. Emerging markets were up 3.51%, extending their strong performance largely driven by an increase in earnings and a weaker dollar.
We increased our international equity exposure based on improving growth prospects and attractive valuations. Foreign equity returns have decoupled from the U.S. markets, providing portfolios added diversification and return.
Interest rates rose in October, particularly at the short end, driven by the passage of a Congressional budget resolution, more encouraging economic data and uncertainty over who will be nominated as the next Fed Chair.
The Fed has the confidence to continue gradually hiking its short-term policy rate and start its balance sheet unwinding. We expect a continued increase in short-term rates, with little movement in long-term rates.
- This information has been compiled using data and other statements of fact derived from sources which we believe to be accurate and reliable. However, such data and other statements of fact have not been verified by us, and we do not make any representations as to their accuracy or completeness. Any opinion expressed herein reflects our judgment at this date and is subject to change.