Key Market/Economic Observations

United States
U.S./China Trade Truce and Accommodative Federal Reserve Policy Clear Path for Market Gains

Supported by easing trade tensions, a mid-cycle adjustment by the Federal Reserve, and a better-than-feared start to third-quarter earnings, the S&P 500® reached an all-time high in October. The United States and China tentatively reached a partial trade agreement early in the month; however, cautious optimism is warranted, in our view. As third-quarter earnings reports come in, the negative growth estimate highlights the divergence between company-specific issues at larger firms compared to the majority of firms that are actually posting positive results.

International Developed Markets
Stocks Resilient despite Ongoing Manufacturing Slowdown and Macro Concerns

In contrast with the slowdown in global manufacturing and lingering macroeconomic concerns, developed international equities remain resilient. The MSCI World Index ex-U.S. has posted double-digit returns year to date, despite the ongoing uncertainty from Brexit, the Italian budget crisis, a slowdown in German manufacturing, and the long-delayed consumption tax hike in Japan. 

Emerging Markets
Cyclical Rally and Trade Optimism Support Emerging Markets

Emerging market (EM) equities are on pace for their third strongest monthly return of the year. For the second consecutive month, the rally was led by Financials, the largest EM sector by market capitalization. In our view, easing trade tensions have been a catalyst to support cyclical sectors that have lagged for most of the year. Since the end of August, EM has been the best performing equity asset class, outpacing the S&P 500 by approximately 200 basis points.

Commodities Broadly Higher on Trade Optimism; Supportive Supply Developments

Commodities were broadly higher in October as easing global trade tensions outweighed concerns over the recent soft patch in global manufacturing activity. Crude oil rebounded after a stronger-than-expected decline in U.S. inventories and the reiteration of OPEC’s commitment to preventing a supply glut in 2020. Coupled with improving global trade expectations, copper prices climbed toward their highest level in three months as civil unrest increased in Chile, the world’s largest producer.

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Global Market Snapshot