Curious which were the best and worst performing asset classes for the month of October? Deutsche Bank explains.
After September’s no Fed taper fuelled performance, financial markets were supported in October by the near-term satisfactory resolution of the fiscal situation in the US. Asset returns in October broadly reflect what we’ve generally seen so far YTD. Developed world equities have seeing the best of the returns while the performance of commodities has been disappointing. October’s highlights in equities centred on the European periphery where Greek, Italian and Spanish equities returned +17.2%, +11.1% and +8.3% respectively, pushing YTD returns above +20% for Italy and Spain and above +30% for Greece. That said Japanese stocks still lead the way YTD with the Nikkei up just shy of +40% (+39.9%) despite weaker returns in October (-0.9%). EM equities produced another decent month of returns (+4.9%) following the summer’s weakness with the MSCI EM index now back into positive territory YTD, only Chinese stocks (-1.5%) saw negative returns in October amongst the EM countries included in our review.
At the other end of the returns spectrum commodities saw further declines with the CRB index (-2.7%) seeing it’s 6th monthly decline of the year with the YTD performance of -5.8%. Although US WTI crude fell -5.8% in October it is still up (+5.0%) YTD; one of the few commodities to be in positive territory in 2013.
In terms of fixed income returns were positive across the spectrum as key government bond yields saw further declines. 10 year Treasury yields fell around 6bps to 2.55% and traded below 2.5% during October. Government bonds saw more impressive declines in Europe with the 10 year Bund and the 10 Year Gilt both down around 10bps to 1.67% and 2.62% respectively. So government bond total returns were positive with Italian BTPs leading the way (+2.6% in October and +6.2% YTD). EM bonds retraced more of the summer weakness but they remain in negative territory YTD. In credit we saw further outperformance from the higher beta part of the credit spectrum with Fin Sub and HY leading the way. GBP Fin Sub returned an impressive +3.2% in October and is up +8.9% YTD.