GoalsGetter Monthly Commentary October

October was a difficult month for both equities and bonds, with political uncertainty in the US leading up to the election, and in Japan where a surprise election roiled markets. Interest rates in the US, UK, Europe and Japan moved higher, and the US Dollar staged a strong rally. This meant most other currencies, such as the NZ Dollar, moved lower which benefitted investors in unhedged global equities.  The New Zealand equity market was one of the few developed markets to post a positive return over the month, boosted in part by the 0.5% cut in interest rates announced by the Reserve Bank of New Zealand. The MSCI ACWI (NZD Hedged) was down 1.1%, with Europe, China and Hong Kong all down over 3% for the month. Japan (+3.1%) rallied after two months of weakness while share markets in the US, Australia and UK were all down around 1%. With the NZ Dollar falling back below USD0.60 the MSCI ACWI Index (NZD unhedged) was up 4.5%. The Bloomberg Global Agg Index (NZD Hedged) fell 1.5% for October, while the NZ Composite Bond Index fared slightly better, down -0.5%.  
Central bank activity continued to be an important dynamic for equity and bond markets around the world. The European Central Bank (ECB) cut rates by 0.25% - its third such rate cut in the current cycle.  Economic data there has been weak in areas such as business activity, wage and inflation readings. In early November, the Fed cut the federal funds rate by 0.25%, while the Bank of England (BoE) delivered its second 0.25% rate cut in this cycle, in part due to reduced risks of inflation persistence.
Most sectors were weak over October, with Communication Services and Financials the only two that didn’t post a negative return. Communications is dominated by mega-cap names Alphabet and Meta (Facebook), and the former performed well over October. Materials, Real Estate, Healthcare and Consumer Staples all fell between -4.5% to -5.9%. On a year-to-date basis IT (+24.3%) and Communication Services (+24.5%) are still the standout performers, but more interest-rate sensitive sectors like financials (+18.5%) and Utilities (+15.6%) are also doing well.