top of page
  • Belvedere Group

October 2023 Market Commentary

Updated: Nov 9, 2023

Developed Markets

Executive Summary

  • It was a flurry of major company news and earnings results for US blue-chip companies. JP Morgan's third-quarter results showed profit surged 35% to $13.15 billion, or $4.33 a share, from a year ago. Revenue climbed 21% to $40.69 billion, buoyed by the stronger-than-expected net interest income. That measure rose 30% to $22.9 billion, exceeding analysts’ expectations by roughly $600 million. JPMorgan’s retail banking division saw profit surge 36% to $5.9 billion, fuelled by higher net interest income and the acquisition of First Republic.

  • As the United States economy powers ahead, Europe is moving along a different path: a drawn-out economic slowdown inflicted by a double dose of high interest rates and the lingering impact of Russia’s war in Ukraine. Europe's largest economy, Germany, saw its business activity contract for a fourth straight month as the downturn in manufacturing persisted with a renewed decline in services. Hence, this proved to suggest that a recession might be fast approaching in Germany.

Markets Summary

US large-cap stocks opened the gates of the final quarter of 2023 with high expectations of a rebound from a September encompassed with losses across major indexes. The S&P 500 closed the first trading day of October notching a 0.09% rise to start the new month seeking to erase the nearly 5% decline recorded in the prior month. The second trading week of October 2023 commenced with the S&P 500 ending in green, despite the conflicts between Israel and Hamas that pressured the already fragile equity market with rising prices and interest rates.

The S&P 500 closed below a key level in October after disappointing quarterly results from Google-parent Alphabet and a rebound in interest rates. Analysts were closely monitoring the S&P 500 which plunged by -1.43% to close at 4,186.77, ending the final week of the month below the record 4,200 level. It was the first time the S&P 500 closed below this threshold since May 2023. Alphabet shares tumbled more than 9% as its cloud business missed analysts’ estimates, overshadowing its strong revenue growth and earnings beat. The S&P 500 dipped into correction territory on Friday, October 27, 2023, declining -10% off from its peak recorded in July 2023, over the renewed selling on fears of a recession. In Europe, the FTSE 100 fell -3.8% in October, representing the index’s worst monthly performance since May 2023.

Performance Analysis:

With uncertainties and pessimism hovering over the past months, optimism lingers in November as the eleventh month of the year traditionally holds promise as a resilient month for financial markets, providing some positive signs for an uptick as the year draws to a close. In our opinion, high rates and inflation aren’t the only factors investors may feel justified to exit the stock market, with geopolitical tensions escalating and a US election on the horizon. However, we align with remaining fully invested in developed markets despite the uncertain macroeconomic conditions, as the pros certainly outweigh the risks of standing still. We believe investors should continue seeking opportunities for income generation and portfolio growth. Furthermore, you need to seek investment counsel from your wealth advisor to assist in identifying asset classes that align with your long-term goals after considering the risks and rewards of investing in DM equities.

United States Blue-Chip Companies Release Q3 2023 Results

Large companies in the US continued their stardom in Q3 earnings, with JPMorgan Chase topping analysts’ estimates for third-quarter profit and revenue as the bank generated more interest income than expected. At the same time, credit costs were lower than anticipated. Its corporate and investment bank saw profit dip by -12% to $3.1 billion on declines in trading and advisory revenue. Citigroup reported its third-quarter results, with solid growth in institutional clients and personal banking fuelling higher-than-expected revenue and earnings per share. Revenue and net income rose by 9% and 2%, year over year. The bank said it was the best third quarter in the past decade for rates and currencies revenue. The quarterly report comes after a period of uncertainty for U.S. banks. Bank stocks plunged last month (September) after the Federal Reserve signalled its intentions to keep interest rates higher for longer than expected to fight inflation amid unexpectedly robust economic growth.

Tesla’s shares rose as much as 2.4% in extended trading after the release of its third-quarter results. However, they sank more than 4% after CEO Elon Musk cautioned that the Cybertruck would not deliver significant positive cashflow for 12 to 18 months after production began and emphasized the company’s focus on making its cars more affordable amid a high-interest rate environment. Earnings were reported as 66 cents per share, below the 73 cents per share expected, while revenue stood at $23.35 billion, less than the $24.1 billion forecast. It was the first time Tesla has missed its earnings and revenue target since its second-quarter 2019 report. Tesla ended the week of its earnings release more than 15% lower, its worst week since December 2022, and closed October in red, losing more than -11% month-to-date.

Tesla's margins have dwindled as the company repeatedly slashed prices on many of its models in the face of weak domestic demand and increasing competition from Chinese EV makers like BYD Co. (BYDDY). Earlier this month, Tesla said third-quarter deliveries, a proxy for sales, were 435,000, below analyst's predictions. Production in the period fell to about 430,000 from 480,000 in the second quarter. The company attributed the production decline to planned downtimes for factory upgrades. In our opinion, an EV price war is good for consumers, as industry-wide US sales reached a record of 300,000 vehicles for the third quarter. However, Tesla's share of the market is dwindling. The company now controls just half the market, its lowest-ever market share and down from 62% in the first quarter.

Europe Business Activity Contracts in October 2023

Eurozone business activity took a surprise turn for the worse in October as demand fell in a broad-based downturn across the region, entering the fourth quarter on the wrong foot, amid heightened fears that the bloc may slip into an economic recession. The purchasing managers' survey showed disappointing reading for the European Central Bank, and market pricing now suggests ECB President Christine Lagarde's 'higher-for-longer' interest rate narrative may not last as some expect.

HCOB's flash Eurozone Composite Purchasing Managers' Index (PMI), compiled by S&P Global and seen as a good measure of overall economic health, fell to 46.5 in October from September's 47.2, representing its lowest level since November 2020. Furthermore, it was the lowest reading since March 2013 outside of the COVID-19 pandemic months, as Europe’s PMI remains well below the 50 level which signifies growth in activity.

Growth in the eurozone contracted 0.1% this summer, more than expected, as record-high interest rates intended to fight inflation blunted economic activity in Germany and France, the region’s two biggest economies, Europe’s statistics agency reported Tuesday, October 31. In our opinion, the downturn reflected the challenges facing policymakers at the European Central Bank, who paused their campaign of interest rate hikes amid signs that the region’s economy has weakened. Data showed that the eurozone’s inflation rate in October eased to 2.9%, another indication of the impact of the central bank’s higher interest rates.

Emerging Markets

Executive Summary

  • The world's second-largest economy registered a 4.9% annual growth rate in July-September, surpassing analysts' expectations of approximately 4.5%. However, this growth rate was considerably lower than the 6.3% annual expansion in the previous quarter. In recent months, the Chinese government has introduced a series of policy measures to boost the economy. These measures encompass infrastructure investments, interest rate reductions, and relaxing restrictions on home purchases, all in the country’s bid to rejuvenate the property sector.

  • Brazil's annual inflation accelerated at a pace that was slightly below expectations despite the central bank's indication that it would continue with a consistent rate of monetary easing until the end of the year. According to government data, consumer prices increased by 5.19% in September compared to the previous year, slightly lower than the median estimate of 5.25% from analysts surveyed by Bloomberg. The cost of transportation, notably affected by airfares, experienced an exceptional increase of 7.7%, in contrast to a relatively modest 4.1% increase in the previous month. The sharp rise is the primary driver behind the overall inflation rate's uptick.

Market Summary

The MSCI Emerging Markets Index continued its negative trend in the last quarter of 2023, with a year-to-date decline of -4.28% as of October 27th, compared to the -0.38% reported in September 2023. The primary driver of this trend remains the fluctuations in the U.S. Treasury market. Although the 10-year yield briefly surpassed 5.0% during the month, a rapid drop of 20 basis points led to most stocks moving into positive territory and had a downward impact on the U.S. dollar. Despite these fluctuations, the equity markets remained subdued for a significant part of the month due to companies releasing their earnings reports. Additionally, reduced economic activities in Asian markets, particularly in Japan and Australia, contributed to the negative performance of the index during the month.

Emerging Markets ended October in negative territory, with a month-on-month decline of -3.94%, marking a deeper decrease compared to the -2.81% reported in September 2023. The decline was primarily driven by poor performance in Asian markets, particularly India.

Indian blue-chip stocks saw a decline as of the end of October 2023, marking its worst month in 2023. The decline was due to a combination of factors, including high U.S. interest rates that prompted ongoing sales by foreign investors and rising oil costs as a result of the Middle East crisis. The S&P BSE Sensex (.BSESN) finished -0.37% lower at 63,874.93, while the NSE Nifty 50 (.NSEI) dropped -0.32% to 19,079.60 as of the 31st October 2023. In October, they lost about -3% apiece.

Worries over the Middle East conflict have caused oil prices to increase, which is bad news for net importers like India. The talk of higher-for-longer rates by the US Federal Reserve has contributed to the multi-year highs in US Treasury yields, which has increased investor appeal. Consequently, overseas investors divested Indian shares valued at 228.50 billion rupees ($2.74 billion) in October, the highest amount for any month since January. However, China's recent economic and market indicators are improving, as investors express confidence in the potential for a positive trade relationship between China and the United States. The CSI 300 index of blue-chip stocks, demonstrated a noteworthy increase on October 27, 2023. Notably, it marked the fourth consecutive day of gains, the best performance since June. The 1.5% rise on October 27, 2023, was the most significant increase seen in seven weeks.

In contrast to the previous month's performance, equity markets may witness a positive trend in November, given the recent decisions by many central banks to maintain stable interest rates. However, there are still uncertainties about the sustainability of this positive trend. Furthermore, we anticipate that India will play a significant role in stimulating economic activities in the Asian markets. Our optimism is underpinned by the country's stable political environment and its youthful demographics. Hence, we expect investors to carefully monitor the activities of the fixed-income market as any slight increase in rates could tamper the returns of the stock markets. We expect long-term investors to outperform day traders over the long run as they pay more attention to the drivers of the equity market before increasing their holdings, playing to our thesis of fundamental investing.

China’s economy grew 4.9% in Q3, surpassing analysts’ expectations

China's economy exhibited a faster-than-anticipated growth rate in the third quarter, and both consumption and industrial activity in September outperformed expectations. These positive outcomes indicate that the recent surge of policy initiatives is contributing to fortifying a cautious economic revival. Gross domestic product (GDP) for the July-September period, as reported by the National Bureau of Statistics, exhibited a year-on-year growth rate of 4.9%. This figure surpassed the expectations of analysts participating in a poll, who had projected a 4.4% increase. However, it represented a slowdown from the 6.3% growth recorded in the second quarter.

On a quarter-to-quarter basis, the GDP expanded by 1.3% in the third quarter, showing an acceleration from the revised 0.5% growth seen in the second quarter and exceeding the projected 1.0% growth. In September, industrial output exceeded expectations, growing by 4.5% compared to the previous year, maintaining the same pace in August.

Retail sales, which serve as an indicator of consumption, also surpassed expectations by rising 5.5% last month, an acceleration from the 4.6% increase observed in August 2023. Analysts had anticipated retail sales to grow by 4.9%. Fixed asset investment expanded by 3.1% in the first nine months of 2023 compared to the same period the previous year, slightly below the expected 3.2% increase. This rate remained consistent with the 3.2% growth experienced from January to August. The country’s property sector remains a drag on the economy, with property investment tumbling 9.1% in the January-to-September period from a year earlier.

For the first nine months of the year, China's economy expanded by 5.2% when compared to the corresponding period in the previous year. This growth aligns with Beijing's goal of achieving approximately 5% economic growth for 2023. The expansion indicates a slight improvement in the Chinese economy. However, there are persistent demands for heightened policy assistance to sustain a stable growth trajectory, given concerns about the sustainability of the recovery. We believe that China's economy will experience a continued resurgence in the fourth quarter of 2023, which is typically associated with a peak in consumption, as there was a year-on-year increase of 5.5% in retail sales in September. The growth is anticipated to play a significant role in helping China attain its annual growth target of approximately 5% for the year.

Spike in Air Travel Costs Drives Brazil’s Inflation Higher

Brazil has been contending with mounting inflation propelled by a significant surge in air travel expenses. According to the Brazilian Institute of Geography and Statistics (IBGE), Brazil's annual inflation rate rose to 5.19% in September 2023, up from 4.61% in the previous month, marking the highest level in seven months. However, this figure fell slightly below market expectations of 5.27%. This increase further distances the inflation rate from the Brazilian government's target of 3.25%, leading to speculations that the central bank's ongoing rate-cutting efforts might be more restrained than anticipated.

Consumer prices saw a significant acceleration in the transportation sector, with a 7.7% increase compared to 4.1% in August. This was mainly attributed to the sharp rise in fuel costs, surging by 13.42% due to factors like the easing base effects from the Russian invasion of Ukraine, a fresh global increase in crude oil prices, and elevated ethanol costs in Brazil's primary sources.

Brazil Inflation Rate (October 2022 - September 2023):

Conversely, inflation continued to decelerate in the food sector, with a 0.88% increase compared to 1.08%, thanks to reports of robust agricultural harvests, and in the housing and utilities category, where it decreased to 5.28% from 5.42%. Monthly, consumer prices experienced a modest increase of 0.26%. High oil prices and weather-related uncertainties, coupled with concerns regarding Brazil's fiscal challenges and rising U.S. bond yields, have maintained inflation expectations at levels that exceed official targets, remaining slightly above the desired range.

The head of monetary policy at Brazil's central bank noted that the escalation of violence in the Middle East was exacerbating the macro landscape but reaffirmed the determination of policymakers to taper borrowing costs. Following an unexpectedly positive economic performance in the nation this year, Banco Central do Brasil is expected to keep implementing modest rate reductions while keeping an eye out for any potential comeback of inflationary pressures amid mounting uncertainties for 2024. We believe that a slowdown in inflation is likely given the determination of policymakers to continuously reduce borrowing costs. However, the likelihood of El Niño (a warming of water temperatures in the Pacific Ocean that is linked to extreme weather conditions), weather pattern having an impact on this year's plentiful agricultural output is beginning to swing the odds in favour of the positive.


The commentary you find on this page is for information only; it is not intended as research or a recommendation suitable to your individual circumstance. Please seek financial advice from a professional before acting on investment decisions.

As is the very nature of investing, there are inherent risks, and the value of your investments will both rise and fall over time. Please do not assume that past performance will repeat itself and you must be comfortable in the knowledge that you may receive less than you originally invested.


bottom of page