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 High Growth Fund performed well in October off the back of continued gains in AI-related investments and a resurgence in Healthcare, producing a solid 2.52% for the month. The new Focused Growth Fund benefitted from this also, returning 4.85%, thanks to the fund’s concentrated exposure to our investment themes. 

The leading global stocks for October were Caterpillar Inc (+23%), Thermo Fisher Scientific (+18.6%), and leading GLP-1 producer Eli Lilly (+14.7%). Domestically, Summerset was up +8.4% for the month, followed by Freightways with +7.5%, gentailer Meridian also produced a decent return +6.3%. Fortescue (+14.2%), Woolies (+6.6%), and Transurban (+5.1) were the standout performers out of Oz for the month. 

The Income Fund produced +0.60% for October with interest rate cuts around the world being of benefit for the prices of the underlying bond funds. It was another good month for corporate bonds globally, with government bonds generally underperforming. The fund’s underlying bond managers with larger weighting to corporate bonds benefitted from this. Weak Q2 GDP growth in NZ also fed into expectations of further cuts to possibly 2.5% or lower by year-end, which helped also. The new Cash Fund also produced 0.24% for the month and continued to achieve its goal of providing regular income.