Market Outlook – November 2018

Executive Summary

• October was a bad month for risk takers. US large caps plunged 6.8%, leaving them as the only equity asset class keeping its head above water for the year. Economically sensitive sectors like energy and industrials bore the brunt of the selloff while defensive sectors like staples and utilities gained ground.
• The Russell 2000 was the equity asset class hit hardest last month. The index of small cap stocks gave up nearly 11% in October, its worst monthly showing since 2011.
• International equities plunged 8% in October, leaving the asset class nearly 9% lower for the year. Some European countries were particularly hard hit with Greece and Belgium off between 20% and 30% year to date.
• Emerging market equities fell nearly 9% last month, leaving the beleaguered asset class down over 15% for the year. China, the anchor of the index, has lost over 20% of its value this year as tariffs and domestic deleveraging have taken their toll on the world’s second-largest economy.
• Interest rates rose across the maturity spectrum last month, pulling down bond returns in their wake. High-quality bonds slipped fractionally as a consequence of higher rates. Intermediate-term interest rates rose roughly 0.1% in October.
• High-yield bonds suffered a 1.6% reversal in October as credit conditions tightened in response to the prospect of slowing economic growth.