Red October: what the experts think
A sea of crimson
“Stock markets ended October on a positive note,” said The Economist. “But that wasn’t enough to stop the month from being one of the worst for equities since the financial crisis.” Some $5trn was wiped off shares globally as investors pondered “a jumble of anxieties”, including rising interest rates, the slowing Chinese economy and uncertainty over global trade tensions. Although the sell-off on Wall Street grabbed attention – particularly the “brutal” selloff of tech stocks – “bourses elsewhere have been struggling for months”. The Euro Stoxx 50 index is down by 10% this year; China’s stock market is off by more than 20%. With western companies increasingly “citing China as a factor behind weak revenue growth”, it is “events in the East, not the West, that will increasingly set the tone for financial markets”.
Respite in sight?
Too right, said Michael Mackenzie in the FT. The effects of “China’s economic stumble” have “rippled across emerging markets, industrial metals prices and the export-focused eurozone”. And they’re now “beginning to wash up in the US” amid “worrisome warnings from some US companies that the Sino-american trade war is driving up their costs”. That message may be getting through to the Oval Office, where President Trump has sounded a more conciliatory note. That could be just the “respite investors crave”. Certainly, if the ante is upped in the new year, when the 10% tariff on $200bn of Chinese goods jumps to 25%, “the start of 2019” could make this year look benign.
Bully for Blighty
The impact of the US midterm elections may well be minimal, said Tom Stevenson of Fidelity International: the outcome was exactly what Wall Street had expected. But political events continue to move markets. Ongoing Brexit uncertainty has ensured that “the FTSE 100 is now trading at a significant discount to other developed markets”. But a glimpse of light in negotiations saw fund managers “focused on UK stocks” enjoy “a rare week at the top of performance charts”, said Daniel Grote on Citywire. UK mid-cap funds run by the likes of Franklin, AXA Framlington and Royal London have suffered badly since the Brexit vote. Last week, they all put on 4% plus.