This month:
- Central banks continue to drive interest rates higher, as inflation remains stubbornly high. While the RBA has eased up a little by raising rates by only 0.25% for each of the last two months, the U.S. Federal Reserve is still powering ahead and raised rates by another 0.75% in early November.
- Inflation remains elevated, but the annual headline inflation rate in the US slowed for the third month running to 8.2%. On the contrary, US core inflation continues to rise. In the European Union, the annual inflation rate has now well and truly cracked double digits with September’s figure reported at 10.9%.
- While most forward-looking economic indicators point to a major economic downturn in the developed world, unemployment remains completely inconsistent with a recession scenario. All three of Australian, the US and European unemployment figures are at or near record lows.
- The S&P 500 had a stellar October, gaining around 8%, while the Australian S&P 200 also rose by an impressive 6%. In Australia, Quality and Value-Weighted were the best performing styles for the month, while globally, Momentum and Value were the best performers.
- Within Fixed income markets, Australian bonds and high yield performed well for the month, with high yield returning a very respectable 2.2%. As global economic indicators turn more negative, this is likely to mean credit could come under greater pressure. As far as Australian bond funds go, now that the average yield to maturity is around 4% versus around 1.5 – 2% at the start of the year, these are becoming somewhat more attractive, especially since the RBA has only raised rates by 0.25% for each of the last two months.
Read the full Monthly Economic Wrap prepared by IOOF Research here.
