Continued enthusiasm around AI, coupled with news of a trade agreement between the US and China – where the US reduced tariffs and Beijing eased restrictions on rare earth exports – helped drive global equities higher last month.
The S&P 500 rose 4.9% in sterling terms, with large-cap stocks once again outperforming mid-caps. Technology companies led the rally, and the ‘Magnificent 7’ now account for more than 36% of the index, underscoring the concentration in US equity markets.
We benefited from this move through our recent allocation to the iShares Clean Energy ETF, which gained 14.2% last month as investors focused on the vast amount of energy required to power the expansion of data centres. In addition, our position in the iShares Emerging Markets Value ETF added to its strong year-to-date performance, rising 11.4% in October as TSMC and SK Hynix rallied on the increasing optimism around AI demand.
In fixed income markets, the Federal Reserve implemented another quarter-point rate cut, bringing interest rates to their lowest level in three years. For the first time since 2019, the decision saw duelling dissents, with Miran advocating for a further cut and Schmid voting to keep rates unchanged. In corporate bonds, spreads in Investment Grade and High Yield bonds widened modestly, but with overall yields remaining high, our allocation to the L&G Short Duration Corporate Bond fund delivered a positive return last month.
Within our Alternatives allocation the position in the iShares UK Property fund benefited from the fall in longer term UK Government Bond yields as investors brought forward their rate cut expectations following a dovish shift from the Bank of England and was up 2.8% last month.
In the Diversifying Assets allocation, we saw positive performance from the Pacific G10 Macro rates fund, with the fund up 0.6%. The fund looks to have a low correlation to both equities and bonds by investing across a diversified portfolio of rates.
