Key Points:
- Stocks continue to reach all-time highs with the Dow Jones Industrial Average soaring past 23,000
- The US economy expanded by 3% in the third quarter
- Corporate earnings came in strong during October, with Caterpillar, 3M, Amazon and GM all reporting earnings above analyst estimates
2017 has been a strong year for risk assets, and October did not disappoint. With the Dow Jones Industrial Average soaring past 23,000 the S&P500 returned 2.33% for the month, bringing its year to date return to 16.91%. As has been the case all year, domestic large caps outperformed small (+0.85%) and mid (+1.67%) cap stocks. Large companies had strong earnings from Caterpillar, 3M, Amazon, GM (et.al) which beat analyst estimates. Growth stocks continued to outperform value names, with the best performing sector once again being technology (+7.76%). Utilities (+3.9%). materials (+3.87%) and financials (+2.93%) experienced strong returns. The strong stock performance was not felt across all sectors though, with telecom (-7.62%), consumer staples (-1.4%) and healthcare (-0.76%) all lagging.
International developed stocks underperformed US counterparts, up 1.52% during the month. They still lead US stocks for the year up 21.78%. Japan (+4.61%), Germany (+1.53%) and France (+1.48%) led the way. Emerging markets continue to be the best global equity market, up 3.51% for the month and 32.26% for the year. It is a good reminder of the volatility in these markets by looking at the individual country performances: Korea (+8.40%) and India (+7.37) were the winners, while Mexico (-7.57%) and Brazil (-3.29) saw steep losses.
The US economy expanded at a 3% pace in GDP for the third quarter. Congress is in the midst of working on a tax bill, but there still seems to be a great deal to work out. The stock market has had a lot to cheer about but fear in fixed income markets saw volatility in rates in October. Bond investors have been speculating on the new Fed chair and concerned over potential inflation from strong economic growth. The 10-year treasury spiked to 2.43% before falling at the end of the month. Bonds were relatively flat for the month with the Barclays Aggregate Bond Index up 0.06%. High yield bonds performed the best, up 0.42% while global bonds saw a -0.38% loss.
Sources: Morningstar, Wall Street Journal