Market Update. US markets hit new record highs in October
The month at a glance
All WealthBar portfolios ended October higher as optimism over a US-China trade deal and positive Q3 earnings drove a strong global rally.
In brief: October Market Movers
- US equity indices hit new record highs in October as the US and China took a positive step towards a trade deal and US companies posted strong third-quarter earnings, easing concerns of a global slowdown.
- International markets also rallied higher, echoing US optimism and bolstered by another rate cut by the US Federal Reserve (The Fed) and the European Central Bank’s commitment to keeping rates low.
Keep reading for a deeper dive into how these events are shaping the market or jump to performance.
US and China announced that they have agreed on ‘phase one’ of a trade deal:
- In October, US markets celebrated the news that US and Chinese negotiators have agreed on a partial trade accord. While the deal is currently informal, President Donald Trump said that he and President Xi Jinping could sign as early as November.
- The phase one deal would include China buying US agricultural commodities, certain intellectual-property measures, and concessions related to financial services and currency.
- The US delayed October tariff increases, but December tariffs hikes are still on the table.
A positive US Q3 earnings season boosted global investor sentiment:
- Most US companies beat analyst expectations in Q3. Intel, Visa, Apple, Facebook, Universal Display, and Kraft Heinz demonstrated strong results.
- There were some misses or weak guidance from large cap companies such as Alphabet, Caterpillar, Texas Instruments, Ford, Ebay, 3M, Nokia, Amazon and Hyundai Motor.
The US Federal Reserve continues to support the US economy with another rate cut in October:
- The US Federal Reserve (The Fed) reduced interest rates by 25 basis points again. It was the third rate cut in four months. As expected, the news was well received by investors.
- The previous two interest cuts appear to be having a positive effect on the US economy with a better than expected third quarter gross domestic product (GDP). Consumer spending also continued to show resilience in the third quarter.
- The Fed hasn’t signalled that additional rates cuts are in store for the balance of this year.
Continue to expect some volatility as we head into the final two months 2019. Here’s what we’re watching:
- The German economy, the largest in Europe continues to be weak. If growth continues to slow, the impact could spill over to other European countries.
- The Hong Kong protests have plunged the island into its first recession in a decade. Meanwhile, there is social unrest and protests around the world as millions take to the street to protest issues including inequality, government corruption and poverty. Social unrest disrupts local economies and consumer confidence. In addition to Hong Kong and France, social protests have appeared in Spain, Chile, Bolivia, Venezuela, Egypt, Lebanon, Ecuador, and Argentina.
The fixed income asset class delivered mostly flat to modest returns during the month. The best performing assets classes were US and international equities. Given this, ETF Safety and Conservative were mostly flat from their fixed income allocation but gained from their exposure to equity allocation. ETF Balanced, Growth and Aggressive Portfolios benefited from their equity allocation to US and international equities.
|October performance||1-Year performance|
|ETF Safety Portfolio||0.08%||5.16%|
|ETF Conservative Portfolio||0.30%||6.36%|
|ETF Balanced Portfolio||0.50%||8.54%|
|ETF Growth Portfolio||0.65%||9.36%|
|ETF Aggressive Portfolio||0.75%||10.92%|
Private Investment Portfolios
The Balanced Private Portfolio delivered strong performance during the month of October given its low exposure to the flat fixed income asset class. The Safety Portfolio saw some drag from the short-term fixed income asset class. The Aggressive portfolio saw some drag from its 25% allocation to the NWM Real Estate Fund.
|October performance||1-Year performance|
|Safety Private Portfolio||0.29%||6.08%|
|Balanced Private Portfolio||0.45%||7.94%|
|Aggressive Private Portfolio||0.28%||7.66%|