Selected Market Indicators for Periods Ended 31 October 2021

Global equity markets rebounded in October after last month’s rout. Inflation, monetary policy tightening and supply chain woes continued to weigh on economic activity, but a strong start to the Q3 earnings season helped investors look forward with optimism. Equity volatility declined significantly over the month. The US outperformed global markets by a significant margin due to its high exposure to growth stocks. Returns for emerging market equities were positive but lower than for developed equities. Strong performance in China was offset by weaker performance across the rest of Asia and Brazil. Credit spreads did not change much. The US dollar weakened in a slightly more risk on environment and energy prices continued to soar.

The MSCI All Country World Index returned 5.0% for the month (-3.6% in September – local currency). Markets shrugged off the widely discussed supply chain and pricing pressures and generally posted solid returns. The latest earnings season gave more reason for optimism and triggered a mini-rally from mid-October that lasted to the end of the month.

Significant developments for October included:

• Supply chain stresses came in the form of component shortages and disruptions to transport logistics, which created a challenging environment for manufacturers and retailers as the holiday season approaches. California ports faced bottlenecks with shipping queues reaching new records. Ports were moved to a 24/7 schedule. However, shortages in truck drivers was the key issue, potentially exacerbated by Californian emission standards for heavy goods vehicles and limitations on owner-operated trucks.
  
• Inflation figures in major economies such as the US, UK and Eurozone remained close to recent peaks, partly due to the aforementioned supply constraints. Emerging markets also saw elevated inflation readings.
• The US debt ceiling deadline was moved to December, but remains a risk. However, it seems that Democrats are coalescing around a significantly scaled down budget that could pass Congress with a narrow majority, along with the bipartisan infrastructure package. This could remove a major source of uncertainty, and also include a longer term fix to the debt ceiling.
• Tensions between the US and China remained high as China Mobile lost its license to operate in the US. The ongoing dispute between the UK and EU over the Irish regulatory border began to intensify again and with it concerns over the potential short term impact on trade.