- The bull market stumbled during a volatile October, with equities posting negative returns. After a peak to trough drop of roughly 10%, the S&P 500 rallied over the final two trading days to close the month at down 6.8%. Sentiment has dragged equities down as concerns of global growth de-synchronizing, tariffs, rising U.S. interest rates, and the sustainability of corporate profit growth have offset a relatively strong earnings season.
- Earnings from S&P 500 companies continue to beat analyst estimates, but forward guidance has been mixed. At month-end, 76% of companies have beaten earnings estimates, which was above the five year average of 71%. Economic growth continues at a strong pace as Q3 GDP expanded at a 3.5% annualized rate, boosted by consumer spending and an increase in inventories.
- Overseas, the EU rejected a budget proposal from the Italian government and Brexit negotiations continue without any material progress. China’s GDP growth eased in the third quarter to an annual rate of 6.5%, in part due to a slowdown in construction and manufacturing.
- Safe haven treasuries provided little relief during the month’s selloff, and fixed income broadly closed the month in negative territory.
- Investors will look ahead to next month’s G20 summit for any indication of a trade agreement between the U.S. and China.
Market Flash Report - October 2018
