November 2023 | Monthly Economic Update
Equities fell for the third straight month in October, giving back nearly half of their gains for the year. The prospect of higher for longer interest rate policies and elevated geopolitical uncertainty as a result of the Israel-Hamas conflict weighed on markets. In October, US equities fell into correction (a drop of 10% from its peak in the summer) but still led the pack among global regions. Regional economic challenges in China, along with weakness in their real estate sector and restrictions on AI chip exports, have sent emerging market equities into negative territory for the year.
Looking across equity sectors, defensive buying benefited utilities and was the only sector with a gain of 1.29% on the month. Energy saw the largest decline, falling 5.97% as slowing economies weighed on the sector. Comparing equity sizes and styles, larger stocks outperformed mid and small as investors sought safety amid uncertainty. Value was more favored within large companies, while growth was more resilient in mid and small.
Bonds broadly saw declines in October as yields pushed higher globally. The benchmark 10-year US Treasury yield crossed 5% briefly during the month – a first since 2007 before the Global Financial Crisis. Longer-dated bonds and lower-quality bonds, such as high-yield bond classes, fared worse.
Lastly, broad commodities were essentially flat, gaining 0.27% for the month. The tragic events that unfolded in the Middle East led to a flight to safety in gold. Oil prices also rallied amid concerns that an escalation into a wider regional conflict could disrupt oil supply, but fell towards the end of the month as concerns of an economic slowdown globally overtook sentiment. Real estate fell with a weakening economic backdrop, leading the index lower, with US REITs falling 3.2%.
Traditional balanced portfolios continued their struggle with the global 60/40 index blend down 2.3% in October. Diversifying alternative assets like commodities and gold saw positive returns, while traditional stocks and bonds detracted from performance.
The Monthly Riddle
What reordered word is a mistake?
LAST MONTH’S RIDDLE: What word can be added before or after these words to make a new word or phrase?
Break, Light, May
ANSWER: Day. Daybreak, daylight, may day.
Tip of The Month
Be cautious during Black Friday sales: often, the “lowest prices” may not be the lowest of the year, and the original price tags can be misleading. Watch out for special-run products, especially in electronics, which might be sold cheaper due to inferior components or missing features. For smart holiday shopping, track prices throughout the season, and remember that shopping outside of Black Friday might sometimes offer better deals.
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