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Market Commentary

October 2021 Market Commentary: Steamrolled

Data Source: Bloomberg

To read the full market commentary, click here.

October 2021 Highlights:

• Global stocks (MSCI All-Country World Index or ACWI) continued their year-to-date advance following strong 3Q2021 U.S. earnings reporting season. In October, MSCI ACWI returned 5.1% led by the U.S. region (S&P 500 up 7.0%).  The other major regions lagged the U.S. equity advance as MSCI Europe returned 4.5% for the month, followed by MSCI Pacific ex Japan (+1.7%), Emerging Markets (+1.0%), and Japan (-3.4%).
• Within the U.S., U.S. large cap growth stocks outperformed small caps and value stocks, with much of this outperformance occurring at the end of the month. U.S. small caps underperformed large caps with the S&P 600 Index returning 3.4% behind the 7.0% return of the S&P 500. S&P Pure Value underperformed Pure Growth, returning 4.5% versus 10.0%, respectively.
• Within the U.S., U.S. large cap growth stocks outperformed small caps and cyclically-sensitive value stocks. S. small caps underperformed large caps with the S&P 600 Index returning 2.0% behind the 3.0% return of the S&P 500. S&P Pure Value underperformed Pure Growth, returning 2.8% versus 5.1%, respectively.
• S. sector relative performance followed the Growth vs Value performance with Consumer Discretionary outperforming followed by Energy, Info Technology, and Materials. Energy and Materials benefited from the continued advance in commodity prices despite the month-end weakness in oil prices following reports that the U.S. would try to jumpstart negotiations with Iran, a major potential oil supplier. Defensive sectors such as Utilities and Staples along with Communication Services (dragged down by social media and telecom) lagged the broad market advance.
• Among risk factors, Momentum and High Quality outperformed Value, Minimum Volatility, and High Dividend. Growth momentum has taken over the 2nd half of this year after a strong start for Value style of investing.
• Investment grade fixed income ended the month unchanged as the 10-Year US Treasury yield rose as high as 1.7% before dropping to 1.56% at the end of the month. Most of the recovery in fixed income was concentrated in long maturity Treasuries and corporate bonds.  Corporate credit spreads widened slightly resulting in a moderate negative return for high yield.  The Bloomberg / Barclays US Aggregate Bond Index returned 0.0% while the US High Yield Index returned -0.2%.
• Non-U.S. bond returns were weighed down by U.S. dollar appreciation while emerging market debt suffered from tighter monetary policy in response to higher inflation as well as ongoing concerns in China’s debt markets.
• Within equity alternatives, REITs recovered from the September sell-off to finish strong with the Dow Jones Select REIT index returning 7.1%. Commodities also performed well, helped by oil prices hovering in the $80/barrel range but gave back some leadership as China renewed a crackdown on widespread speculation in coal and iron ore prices that also dragged copper and aluminum.  Precious Metals lagged the broader advance although industrial-sensitive metals such as platinum and palladium are starting to recover on hopes that global auto production will eventually recover.

To read the full market commentary, click here.