Last month, we didn’t just get an extra hour by turning back the clocks! With a general election now scheduled for 12th December, the UK has been given a further Brexit extension allowing more time to debate how, and under whose leadership, we’ll be leaving the European Union. Although we don’t know what the election outcome will be, continuing along this seemingly never-ending path, could signal the possibility of a second referendum.
Speaking of elections, we turn our attention to the US, where there’s now less than a year to go until Election 2020. It would seem the US-China trade war is impacting some of Trump’s voters who’ll feel it the most - the farmers. According to a recent report, over the last 12 months, there’s been a 24% increase in agricultural bankruptcy filings, which now stand at their highest level since 2011. As a response to the current trade disruption, by the end of the year, the agricultural industry is expected to receive around $30 billion in bail-out funds.
In October, the Eurozone economy defied negative expectations delivering economic expansion in the third quarter. A pleasant surprise for the single-currency bloc region, that has been struggling, with both Germany and Italy experiencing negative growth earlier this year.
Markets
October was a positive month for all global stock markets apart from the UK.
The FTSE 100, which represents the UK’s largest public companies, finished the month down -1.87%. As mentioned previously, this group of companies are highly international, with around 70% of revenue generated overseas. Why does that matter? A strengthening pound, an event that occurred in October, is bad for those globally focused companies, as earnings in other currencies become less valuable when translated back into pounds.
U.S. shares performed well in October, closing +2.17%. Apple was once again the star performer, after a stellar set of results that surpassed Bloomberg analysts’ expectations. Their growth in wearables and services drove the share price up by an impressive +11.07%. So far, the US earnings season, where companies announce their most recent set of results, has been largely positive, with banks and tech also surpassing expectations.
In Japan, the stock market that rose the most out of all of our regions, up +5.38%. Along with the weakening of the Japanese Yen which helps exporters, Japan’s central bank remains the most supportive of all central banks, which drives positive sentiment for shares on the local stock market.
Other regions also performed well, including Emerging Markets (+4.23%) and Asia Pacific (+4.05%).
In corporate news, WeWork, the office co-sharing space, withdrew its IPO (Initial Public Offering) after an investor roadshow suggested lacklustre demand. A raft of concerns raised, from the lofty $47 billion price tag for a loss-making real estate company, to corporate structure and governance concerns surrounding the now departed CEO. Since then, the company has put the ex-CEO’s Gulfstream jet up for sale...Interested? Then you’ll need $60 million!
Currency
In October, the realisation that the UK wasn’t going to leave Europe, with or without a deal on 31st October, lead to fresh optimism and a dramatic strengthening of the pound. It was up against the Euro +2.84%, the US Dollar+5.05%, and +5.00% against the Japanese Yen.
Investment type performance breakdown
Performance among the investment types in your Plan this month was mixed, with shares up +0.14%, and commodities finishing +0.11% . The negative performers for the month were global property at -2.24% and bonds at -0.31%.
Summary with Plan details
Although October was a month of mixed returns, global stock markets excluding the UK performed well. Investors should also take comfort from a strong start to earnings season for corporate America, with some of the largest companies in the world being US based.
We’ve discussed the strengthening pound negatively affecting our plans. In our last rebalance that took place mid-month, we added another layer of protection against the ups and downs of the pound which is called hedging. You can read more about what this means in our ‘beginners guide to hedging’.
As always, our investment team will continue to monitor the markets to make sure your Plan remains on track. If we do need to make any changes to take advantage of the markets, we’ll let you know.
The figures shown are based on a medium-risk (Confident) investment Plan.
Please remember the value of your investments can go down as well as up, and you could get back less than invested. Past performance is not a reliable indicator of future returns.
