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October Market & Economic Update by Tilney’s Head of Multi-Asset Funds, Ben Seager-Scott

Welcome to our latest market and economic update, which looks back over the month of October 2020.


Investors faced another scary ride in October, with few market treats on offer in the run up to the polarised US presidential election and as rising coronavirus cases and fresh lockdown restrictions across Europe took their toll on risk sentiment in the second half of the month.

Against this backdrop, returns were weaker across developed equity markets, with negative monthly returns from European, Japanese, UK and US equities. Asian and Emerging Market equities outperformed, with the rally at the beginning of the month reflecting the recovery in economic activity, particularly in China.

October was a month of mixed fortunes for fixed income markets, reflecting the heightened political risks and expectations of further stimulus from global central banks and governments. Energy prices were notably weaker in commodity markets linked to the expected fall in demand from further lockdowns and restrictions.


In the latest chart of the month, we highlight the latest available data regarding rising Covid-19 cases globally.

The ‘second wave’ has seen the number of confirmed cases rise to stand at over 48 million, with 1.2 million fatalities and aggregate global growth rates continuing to hold around 1%.

As cases appear to be subsiding in regions such as Latin America and India, the second wave continues to sweep across much of Europe, prompting second national lockdowns, whilst the US is also seeing a re-acceleration, notably in New York and New Jersey.

Whilst the race to develop a successful vaccine continues, the global economy faces further headwinds going into the New Year, with rising expectations that global central banks and governments will be forced to provide further stimulus.


  • As highlighted already, October was another weaker month for US equity markets ahead of November’s presidential elections and as policymakers failed to agree on a fiscal package in response to the pandemic. In local currency and sterling terms, the MSCI USA index returned -2.6% over the month. At the sector level, October was another weaker month for the technology and energy sectors, with the latter reflecting the fall in oil prices and the expected drop in demand linked to further lockdowns. Movements in mega cap technology stocks, which continue to drive broader market returns, reflected both risk sentiment towards expensive growth stocks and analyst reactions to the latest earnings results released in the month. Despite ongoing regulatory disputes with the likes of Facebook and Google, the growing strength of e-commerce continued to be reflected in a number of the individual earnings updates. For example, Amazon’s net income was reported to be three times higher than Q3 2019. Elsewhere, the communications and utilities sectors outperformed on a relative basis over the month.
  • UK equities were weak again in October, with rising virus cases leading the Government to prepare a fresh national lockdown and announce the extension of job support schemes. On a total return basis, UK large caps (-5.1%) lagged UK mid-caps (-0.5%) and UK smaller companies (+0.4%). At the sector level, energy, healthcare and technology stocks were notably weak. Financials and utilities outperformed over the month, with the ‘reflation trade’ earlier in the month leading UK gilt yields to rise.
  • The prospect of fresh lockdowns across the continent also weighed heavily on European equities in October. On a total return basis, the MSCI Europe ex UK index returned -5.1% in local currency terms and -5.8% for sterling investors over the month. At the sector level, there were similar trends to other markets, despite a range of companies reporting third quarter earnings ahead of expectations. This wasn’t the case for the German software company SAP, which was notably weaker after its earnings miss and weaker outlook. Ahead of its December meeting, the European Central Bank indicated that further stimulus policies would be announced.


  • Asian and Emerging Market equities delivered positive returns for investors in October, with the rally at the start to the month reflecting the recovery in economic activity, particularly in China, and hopes of a softening in US/Sino tensions after the election. The headline MSCI Asia Pacific excluding Japan and MSCI Emerging Markets indices generated total returns of +2.4% and +2.1% in sterling terms over the month.
  • At the individual country level, there were positive returns from Chinese equities in local currency terms, with the mainland Shanghai Composite index returning +0.2% and Hong Kong’s Hang Seng index +2.8% over the month. Indian and Indonesian equities were also positive over the month, while Brazilian, Russian and Turkish equities were amongst the laggards.
  • After outperforming in September, Japanese equities were weaker in October, with headwinds from a stronger yen and global risk-off sentiment weighing on returns. The MSCI Japan index returned -2.5% in local currency terms and -1.6% in sterling terms


  • October was a month of mixed fortunes for fixed income markets. Within government bond markets, European sovereigns rallied strongly on expectations of further European Central Bank bond buying, while UK gilts (-0.5%) and US treasuries (-1.0%) loss ground as yields rose on expectations of further borrowing and heightened political risks.
  • In credit markets, corporate bonds held up relatively well and there were marginally positive total returns in October. Sterling corporates returned +0.1% and global high yield returned +0.3%.


  • After a weaker month in September, the pound was marginally stronger in October, despite ongoing uncertainty linked to trade discussions with the European Union and what further financial support packages would be put in place over the winter months. In sterling terms, the euro returned -0.7%, the Japanese yen returned +0.9% and the US dollar was flat.
  • The euro was a weaker against most currencies over the month, highlighting fresh lockdowns across the continent and dovish takeaways from the European Central Bank’s latest meeting, with further stimulus expected to be announced in December.
  • In Asia, both the Chinese renminbi (+1.6%) and Japanese yen (+0.9%) strengthened against the US dollar and UK pound in October.


  • Global commodity markets delivered mixed returns for investors over the month of October. The two headline indices, the Bloomberg Commodity and the S&P GSCI, returned +1.4% and -3.6% on a total return basis in US dollar and sterling terms over the month.
  • As highlighted in previous months, the performance of the indices can vary, often reflecting the S&P’s higher weighting to the energy sector. The energy sector was notably weaker in October, with oil prices falling on further lockdowns and expectations of lower energy demand. Conversely, October was a positive month for agriculture and metals, with the latter reflecting China’s economic recovery, declines in inventories and expectations of further stimulus.


  • The delayed data for UK commercial property returns over the month of September highlighted another marginally positive month of total returns for investors. The latest MSCI UK Property data recorded total returns of +0.3%, with the decline in capital values slowed to -0.1% over the month, while income remained stable at +0.4%.
  • At the sector level, September’s capital values data highlighted a strong month for industrials, particularly in the South East. Offices were marginally lower and the retail sector continued the trend of being the main laggard. These returns reflected the Royal Institute for Chartered Surveyors (RICS) latest survey, which highlighted weak demand for UK office and retail space linked to changing shopping and working patterns.
  • Overall, the third quarter of 2020 saw marginally positive total returns for UK commercial property, as RICS lifted Material Uncertainty Clauses (MUC) and a number of open ended property funds started to re-open again. The MSCI UK Property index returned +0.6% over the quarter and is now -3.0% year to date.


The value of your investments, and the income derived from them, can go down as well as up, and you can get back less than you originally invested. Any indication of past performance or quoted yields is not an indicator of future returns. Before investing in funds, please check the specific risk factors on the key features document or refer to our risk warning notice, as some funds can be high-risk or complex, or can be susceptible to risks particular to the geographical area or industry sector in which they invest. Gold, technology and other focused funds can suffer as the underlying stocks can be more volatile and less liquid. Underlying investments in emerging markets are generally less well regulated than the UK. There is an increased chance of political and economic instability and the market(s) can be less liquid.

The property market can be illiquid; consequently, there can be times when investors will be unable to sell their holdings. Property valuations are subjective and a matter of judgement.

Any research or analysis contained in this document has been undertaken by us for our own use and may be acted on in that connection. The contents of the document are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. The document may include forward-looking statements which are based on our current opinions, expectations and projections. It is provided to you only incidentally, and should not be considered a personal recommendation or advice to invest. Any opinions expressed are subject to change without notice.

Issued by Tilney Investment Management Services Limited (Reg. No: 02830297), which is authorised and regulated by the Financial Conduct Authority. Financial services are provided by Tilney Investment Management Services Limited and other companies in the Group, further details of which are available at
© Tilney Smith & Williamson Ltd 2020

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