October 2015 Market Update
October was a positive month while we saw markets recover from the lows experienced in August and September. Equities were driven higher by central bank actions and third-quarter earnings results.
The European Central Bank (ECB) at its October meeting did not adjust its rates or monetary policy, however, Mario Draghi the President of the ECB indicated that consideration is being made to extend its quantitive easing program as it looks for sustained adjustment in inflation. We’ll be keeping an eye on this as things develop.
China’s central bank cut its lending rate to a record low and lowered reserve-requirement ratios for some lenders. These actions were a response to domestic stocks plunging and local government bond sales with the intention to spur economic growth.
The US Federal Reserve keeps interest rates unchanged but hints at December rise. Janet Yellen, the Fed’s chair has previously said that the committee would raise rate if the economy continues to improve. The committee statement cited “economic activity has been expanding at a moderate pace… Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further”. A rise in rates is likely a positive sign for the US economy, and keeps a balance and check around inflation rates.
This was also the same month when many corporations release their third-quarter results. Earnings have been roughly in line with estimates having seen half of the companies beating their estimates. This was true of the technology sector, in particular, eBay, Amazon, Google, and Texas Instruments exhibited better-than-expected results.
The combination of the actions of central banks around the world and favourable corporate results had a positive effect on the markets. Equities rebounded in October, Canadian REITs and fixed income were flat, and all our portfolios were positive with our Balanced ETF portfolio up 2.6%.
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