As October ushered in Halloween, it appeared as though markets themselves were haunted. Both bonds and stocks fell in October plagued by concerns over prolonged ‘higher for longer’ interest rates and growing geopolitical tensions. Gold and energy found themselves as benefactors of the current macro environment as energy prices rallied and investors fled to gold in search of a safe haven. The quarterly earnings season was well underway triggering significant equity volatility and markets were unforgiving to those that fell short of expectations. The war in Ukraine continued and renewed conflict sparked in the Middle East.
UK
During October the economic outlook in the UK continued to weaken. Both services and manufacturing Purchasing Managers’ Index (PMI), which represent the level of economic activity, continued to decline, falling deeper into contraction territory. This was matched with concerns over the health of the UK consumer which fed into domestic exposures reflected well in the return of the FTSE 250 (-6.54%) which represents mid-cap UK equities vs the FTSE 100 (-3.76%) which has a much greater international exposure. The housing sector remained gloomy too with UK house prices reportedly falling by 5.3% in the year to September as rising interest rates squeezed the market.
The Consumer Prices Index (CPI) figures for September brought little respite for investors as the index remained unchanged at 6.7% and core inflation (stripping out the volatile food and energy impact) came in at 6.1%, higher than the consensus forecast of 6%. Persistent inflation and elevated wage growth combined with economic slowdown formed a troubling blend for investors last month.
