Investing for tomorrow

Grey swan is an event that is possible and known, potentially extremely significant but considered not very likely to happen.

October offered a mixed picture following a bruising first three quarters. The Bloomberg Global Aggregate Index was down 0.55%, driven primarily by losses in US Treasuries. However, investors in some segments of the credit markets, especially EUR HY, USD HY and to a lesser extent EUR IG did see positive performance. Most Inflation-Linked Bonds markets with the exception of the US also rallied on persistently high inflation.

Although the economy continues to decelerate, equities staged a strong rebound during the month of October.

In October, we turned more constructive based on our analysis of the market configuration. This month, fundamental support provides further reasons to maintain this stance.

European equities have rebounded over the past four weeks. The rebound was mainly driven by value stocks that have outperformed growth stocks since the last Equity Committee.

If the smile measures how the portfolio value reacts to changes in the underlying markets, then maybe we should measure the smiles – and this is what our investment team has been doing.

Luiz Inacio Lula da Silva narrowly won the second round of Brazil’s election, beating incumbent Jair Bolsonaro. Initial fears that Bolsonaro wouldn’t accept the result, particularly if it was tight, have receded. Bolsonaro said that he would follow the constitution and play by the rules, while his chief of staff, acknowledged the defeat.

European equities closed September lower. In Europe, the energy crisis continued to dominate the headlines, as Russia completely halted gas flows through the key Nord Stream 1 pipeline at the beginning of the month.

Short-term interest rates have been rising around the world over the past year as central banks attempt to fight inflation.

September was another very challenging month for investors. The market is subject to considerable uncertainty, with no clear evidence of the next step.