Equity market trends: a month in two stages
Following a negative month of September, equity markets recovered in the first half of the past month. The S&P500 was even able to reach a level that was hardly below the record of early September. At the beginning of the month, the idea dominated that an agreement about a US stimulus package was still possible before the elections. Also, investors seemed to be reconciled with the prospect of a victory for Democratic presidential candidate Biden. In the second half of the month, the increasing corona infections - not only in Europe but also in the US - cast a shadow on the equity markets. In Europe, where lockdowns are most stringent and the economic impact will be most significant, stock markets show the weakest performance. The emerging markets and, in particular, the Asian stock markets were the outperformers. Contrary to the previous months, growth equities did not outperform value equities, and both reported similar performances. One may attribute this trend to the higher bond rates (in the US) and positioning in anticipation of Biden's possible election. The publications of the quarterly results also played a part. Stock market prices sometimes responded lukewarm to the results of growth companies, even when those results exceeded expectations. This evolution indicates that the bar for those companies is high.