Volatility was widespread in October, as oil realized sharp declines, the U.S. ended its quantitative easing program, global bond yields fell on deflation concerns, and Ebola caused a global health scare. These macro events led to dispersion amongst asset classes, with U.S. equities generally coming out on top. All sectors of the S&P 500 except for energy posted positive results and small caps rebounded strongly from summer weakness, while global equities continued to suffer from low growth in Europe. Bonds experienced abnormal volatility as credit markets experienced selling pressure early in the month caused by outflows from a large fixed income complex (Pimco) and de-leveraging hedge funds.
- Earnings: with 74.6% of the market cap of the S&P 500 having reported, S&P operating earnings are on track to be a record $29.49 for the quarter, representing 9.6% YOY growth and another high in profit margins at 6.4% (J.P. Morgan)
- On October 15th, the yield on the 10yr U.S. Treasury briefly dipped below 2%, as traders reacted to a slide in European equities which exacerbated global growth concerns; the 10yr yield recovered and ended the month at 2.35%
- The Federal Reserve ended its quantitative easing program in October, ending its purchase of mortgage bonds, though it will continue to reinvest principal and interest; since 2008, the Fed has quadrupled its balance sheet to $4.48 trillion
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