Interactive Investor

Top of the markets: big declines on both sides of the Atlantic

6th November 2020 11:33

Tom Bailey from interactive investor

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A surge in virus cases has spooked markets into their worst month since March.

US markets were beset by volatility in October, with investors seemingly spooked by rising Covid-19 infections, US politicians failing to agree to a stimulus, mixed company earnings results, and fears about the US presidential election. All this, according to S&P Dow Jones Indices’ October Index Dashboard, compounded to see the S&P 500 lose almost 3% over the course of the month.

Tim Edwards, managing director of index investment strategy at S&P Dow Jones Indices, noted: “The above-average equity volatility continued in October, much of which occurred during a choppy final week as a US stimulus bill failed to arrive, Covid-19 case counts spiked in the northern hemisphere, and the US election entered its final furlong.”

However, while sentiment weighed on the S&P 500, smaller stocks, unusually for this year, performed better. The S&P MidCap 400 and the S&P SmallCap 600 rose 2% and 3%, respectively.

There was also a reversal in performance in terms of “factors” in the US market. While most experienced losses, the year’s better performers led the way down. For instance, the S&P 500 Quality index lost 4.2%, the S&P 500 Momentum -3.8% and Growth -3.1%. All three factors have been the stars of the year, returning positive gains year-to-date. Growth has been the best year-to-date, returning 16.9%.

Meanwhile, some of the year’s worst-performing factors experienced better returns in October. The S&P 500 Enhanced Value index, for instance, has lost more than 28% year-to-date, but over the course of October its performance was flat. The Dow Jones US Select Dividend and S&P High Yield Dividend Aristocrats indices have also struggled this year, with both experiencing double-digit year-to-date losses. Both, however, provided a small positive return in October.

Performance in Europe was also poor in October. Leading markets down was the uptick in Covid-19 cases and the reimposition of government lockdowns across the continent.

October marked the worst performance among both the S&P United Kingdom index and the pan-regional S&P Europe 350 since March, with both indices down by roughly 5%. The latest bout of poor performance brings the UK’s to -25.5% year-to-date, while S&P Europe 350’s losses sit at -16.9% for this year.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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