Monthly Investment Review for October 2020
- 06 November 2020
- 5 mins reading time
Global equities declined in October as Covid-19 cases continued to climb in many countries. In a mixed month for fixed income, corporate bonds outperformed their government counterparts.
UK equities fell during the month amid renewed pandemic fears, which culminated in the government announcing a new national lockdown. Covid-19 cases rose in many states across the US, while hopes of more financial stimulus there rose, but ultimately came to nought, dragging equity prices down. Both presidential candidates are pledging substantial financial stimulus should they win, but poll results moving in favour of Mr. Biden increased the possibility of greater scrutiny of technology giants.
That sent those stocks down while other sectors that have been left behind rose on hopes that Mr. Biden would act in their favour.
More lockdowns brought more share price falls across the eurozone. The European Central Bank kept monetary policy unchanged at its October meeting, but indicated more stimulus is likely to be announced in December. The eurozone economy expanded by 12.7% in the third quarter of 2020 as activity rebounded. However, new lockdowns will weigh on activity in the coming months. All industrial sectors ended the month down, with IT among the steepest fallers.
Chinese stocks were boosted by the performance of internet companies as well as by better-than-expected corporate earnings. Emerging market equities, such as those listed across the Asia Pacific region, rose due to expectations of additional fiscal stimulus in the US and the positive knock-on effects that it would bring. The hopes of more stable trade relations with the US under a prospective Biden presidency also proved beneficial.
In bond markets, the demand for and prices of European government bonds rose as investors sought lower-risk rated opportunities in which to place money as lockdown measures took their toll on higher-risk rated investments, such as company shares. The reverse was true of the US as stimulus expectations grew.
The demand for corporate bonds was even higher, especially in the US. Euro investment grade corporate bonds delivered the highest price gains.
Finally, commodity prices fell in general, led by oil which reflected expectation of lower economic activity in the wake of the latest lockdown implementations.
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