Monthly highlights of major events which drive financial markets, along with perspectives on what they mean and why they matter.
October in review
In October, market volatility increased, with U.S. and Canadian equity and bond markets exhibiting resilience despite diverging economic signals. Canadian equities saw a modest gain of 0.85%, bolstered by strong performances in the Energy (4.83%), Health Care (4.78%), and Materials (3.67%) sectors. Conversely, U.S. equities experienced a slight decline of 0.92%, primarily due to weakness in Health Care (4.62%), Real Estate (3.57%), and Materials (3.49%) . Canadian bonds fell by 1.01%, while U.S. bonds dropped 2.48%, defying expectations of a positive correlation with falling interest rates. Commodities displayed mixed results: gold and WTI oil rose by 3.38% and 2.20%, respectively, while natural gas plummeted by 19.07%. Elevated geopolitical risks and mixed earnings reports contributed to overall investor caution.
Here are some of October's most notable events:
International Monetary Fund (IMF) warns on escalating Middle East tensions. Escalating tensions in the Middle East, with impacts now extending to Lebanon and Iran, contributed to financial market volatility in October. Despite these uncertainties, stock markets have shown resilience; indices such as the MSCI World Index remained close to record highs, partially driven by investor expectations of potential monetary easing by central banks. The Volatility Index (VIX) also remained elevated, indicating ongoing investor anxiety. The IMF cautioned that further conflict escalation in the Middle East could have significant economic consequences, potentially disrupting global trade and key supply chains, particularly in the energy sector.
Oil prices volatile amidst uncertainty. At the end of October, the price of West Texas Intermediate (WTI) oil closed 2.20% higher, fluctuating between $68 and $78 per barrel throughout the month. This increase was largely influenced by geopolitical tensions and a boost in demand forecasts following China’s announcement of a significant stimulus package aimed at revitalizing its economy. Rising oil prices can have mixed effects; while they often lead to higher costs for transportation and production, potentially squeezing consumer spending and impacting inflation, they can also reflect stronger economic activity.
| Index† | Change (%) | Index Level | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Treasury Bill (FTSE Canada 60 Day T-Bill) | 0.42 | 4.16 | 5.49 | 184.58 |
| Canadian Bonds (FTSE Canada Universe Bond) | -1.01 | 3.21 | 11.75 | 1,157.51 |
| Canadian Equities (S&P/TSX Composite) | 0.85 | 18.23 | 27.82 | 24,156.87 |
| U.S. Bonds (Barclays U.S. Aggregated Bond, US$) | -2.48 | 1.86 | 8.80 | 2,202.17 |
| U.S. Equities (S&P 500, US$) | -0.92 | 20.96 | 35.09 | 5,705.45 |
| Global Equities (MSCI World, US$) | -1.96 | 16.95 | 30.44 | 3,647.14 |
| Emerging Marketings (MSCI Emerging Markets, US$) | -4.32 | 12.11 | 20.99 | 1,119.52 |
| Currencies† | Change (%) | Exchange Rate | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| C$/US ($) | -2.93 | -4.95 | -2.55 | 0.7177 |
| C$/Euro (€) | -0.68 | -3.55 | -5.34 | 0.6595 |
| C$/Pound (£) | 0.67 | -6.14 | -7.84 | 0.5564 |
| C$/Yen (¥) | 2.76 | 2.64 | -0.80 | 109.127 |
| Commodities (US$)† | Change (%) | Price | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Gold Spot ($/oz) | 3.38 | 27.28 | 39.06 | 2,749.30 |
| Oil WTI ($/barrel) | 2.20 | -1.48 | -11.05 | 69.26 |
| Natural Gas ($/MMBtu) | -19.07 | -23.51 | -34.87 | 2.71 |
†Total Return, as at October 31, 2024. Indices are quoted in their local currency.
Source: Bloomberg
Indices are not managed, and it is not possible to invest directly in an index.
Earnings growth remains positive, some sectors stronger than others. The October 2024 earnings season revealed mixed performances across sectors, highlighting resilience in some areas while exposing challenges in others. Banks like JPMorgan Chase saw positive results from increased interest income, and Delta Air Lines benefited from strong travel demand. Microsoft achieved a notable 16% revenue growth driven by cloud services, and Apple exceeded expectations despite a one-time tax penalty. Conversely, the energy sector struggled with declining oil prices, affecting earnings and market sentiment. Analysts project a 3.4% year-over-year earnings growth for the S&P 500, indicating overall resilience, while the tech sector remains a focal point for investors amid ongoing global uncertainties.
Did you know?
Over the past century, October has become notorious for significant stock market volatility, featuring nine of the largest single-day declines in the Dow Jones Industrial Average (DJIA), including the crashes of 1929 and 1987. October typically experiences increased fluctuations influenced by factors like investor sentiment, economic reports, and changes in monetary policy. Additionally, as companies finalize their quarterly results, these economic adjustments communicated through earnings releases further affect investor behavior and market dynamics.
