October saw a bounce in global equities (+5%), even as bond yields continued to drift higher, 20 basis points added to 2- and 10-year US yields, and almost 20 basis points added to 2-year German yields. European and US equities performed strongly, rising by more than 6%, but emerging market equities were 4% lower, China’s ongoing Covid restrictions and the re-election and consolidation of power by Xi Jinping in China weighing on the region. And we have yet another UK Prime Minister!
Earnings season is well underway, with circa 70% of US companies beating consensus earnings estimates (similar to the 75% seen last quarter), and 60% of European companies beating on earnings (again similar to last quarter). Results to date point to an easing of inflation and supply chain pressures (albeit lingering in certain niches), FX headwinds (a source of upside for the coming quarter should the dollar have peaked), consumer resilience – while shifting spending patterns (more holidays and services, less household appliances, strength in non-res/commercial construction, excess inventory in retail, soft consumer electronics, longer deal cycles in tech, weaker online advertising spending, and difficult Covid comparisons (which turns a tailwind once we get past Q4).