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.”
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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.
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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.
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