Global equity markets regained some notable ground in October and posted their best monthly performance of the year. Regionally, developed markets outperformed their emerging market peers, with major North American benchmarks hitting record highs. The S&P 500 had its best month since November 2020 as a flood of stronger-than-expected corporate earnings results propelled US stocks, while the S&P/TSX also posted a respectable gain thanks to solid performance in the heavyweight commodity and financials space. From a sector perspective, pro-cyclicals outperformed their defensive peers as new global COVID-19 cases subsided across most major regions, which bolstered sectors whose fortunes are closely tied to the health of the global economy, such as financials, resources, and industrials.
Fixed income markets generated negative returns in October. Yield curves bear-flattened, with short-term yields rising by much more than their longer-term counterparts as intensifying inflationary pressures saw traders ramp-up their wagers for central bank interest rate increases. In the US, the 2 year treasury yield rose by 22 basis points to 0.50%, while the 10 year treasury yield inched up by a more muted 6 basis points to 1.55%. More dramatic moves took place in Canada following the Bank of Canada monetary policy gathering, where officials ended the quantitative easing program and pulled forward the timing of possible rate hikes. Traders interpreted this outcome in a hawkish light and a major policy re-pricing occurred in the aftermath of the meeting. The 2 year Government of Canada bond yield shot higher by 56 basis points to 1.09% in October, while the 10 year Government of Canada bond yield rose by 21 basis points to 1.72%.
The US dollar weakened against most major peers as renewed appetite for risky assets diminished the appeal of the safe haven currency. By contrast, the Canadian dollar saw some considerable strength after the Bank of Canada opened the door to an earlier rate liftoff, while the profound rally in crude prices also buttressed the loonie.
Crude oil gained by a solid 11% in October on persistent signs that consumption is outpacing supply, which is acting as a drain on global stockpiles. At the same time, the gas-centered energy crunch has buoyed demand for petroleum products, while OPEC and its allies have thus far resisted pressure to aggressively ramp-up production. Finally, gold advanced as investors sought out a hedge to unrelenting pricing pressures given supply chain snarls and costlier raw materials prices, while softer US dollar conditions also propped-up the yellow metal last month.