October marked another positive month for global markets, extending the momentum we saw through the September quarter. US equities posted their sixth consecutive monthly gain, with the S&P 500 up 2.3% and the Nasdaq 100 surging 4.7%, driven by strong Q3 corporate earnings and continued enthusiasm around Artificial Intelligence investment. A widely anticipated interest rate cut from the US Federal Reserve and additional easing measures were also announced later in the month, helping both equity and fixed interest performance. 

Sector performance out of the US was led once more by the tech sector and followed by the healthcare sector, two areas which we target in particular through our Investment Themes. Financials and Consumer Discretionary (which we target to a lesser extent) lagged somewhat, while Materials and Real Estate were hit a bit more.

Outside the US, European markets hit new highs, with the UK and France leading the way. The European Central Bank held interest rates steady, as inflation trends moved closer to target. In Asia, central banks maintained accommodative stances which helped support Emerging Markets equities.

At home, the Reserve Bank cut the OCR 0.5% to 2.5% early in the month, noting inflation sitting near the top of target 1-3% band. While economic data remains underwhelming, the rate cut and high commodity prices helped the NZX 50 index rise ~0.87% and close the month very near to the all-time high. Across the ditch in Oz, the month started strong with energy and tech leading, supported by US-China trade optimism. However, inflation came in hotter than expected, leading to reduced expectations of a rate cut, triggering volatility. Nevertheless, the ASX 200 ended the month up modestly +0.84%. 

Global bond markets delivered mixed returns in October, with the key barometer the Bloomberg Global Aggregate Bond Index down -0.3% in USD but +0.7% when hedged to NZD. The index was weighed down by weakness in government bonds in certain markets, while corporate bonds and emerging market debt outperformed. Credit spreads remain tight across investment grade and high-yield bonds. 

The World Equity Fund returned 2.87% for October, bouyed by the continued rise in AI-related investments. The fund remains heavily invested in the AI value chain (approximately 30%) and other investment themes. The fund also benefited from the resurgence in Healthcare, particularly in the US. Infrastructure also played a more active role in performance this month, with our Infrastructure fund (managed by Kernel) producing 2.6% for the month.

The leading global stocks for October were Caterpillar Inc (+23%), Thermo Fisher Scientific (+18.6%), and leading GLP-1 producer Eli Lilly (+14.7%). Our AI-related stocks continue to do well with Alphabet leading (+17.3%), Amazon was up +12.8%, Nvidia also did well producing +10%. 

The Australasian Equity Fund managed to return a positive result (+0.71%) despite the turbulence triggered by the inflation reading out of Oz. Sector-wise, Resources (+4.2%) and Energy (+3.8%) led in the Ozzy market. The leading stocks out of Oz for October were Fortescue (+14.2%), Woolies (+6.6%), and Transurban (+5.1). At home, Summerset was up +8.4% for the month, followed by Freightways with +7.5%, and gentailer Meridian also produced a decent return +6.3%.

The World Bond Fund (+0.53%) and New Zealand Bond Fund (+0.86%) both had strong results for the month off the back of a slew of interest rate cuts around the world, including here in NZ. The underlying funds with greater weighting towards corporate bonds within the World Bond Fund did better. Weak Q2 GDP growth in NZ also fed into expectations of further cuts to possibly 2.5% or lower by year-end, which helped the New Zealand Bond Fund.