Stocks retreated in May while bond yields fell to new lows for the year. After several months of optimism for a trade deal, the US and China appear no closer to reaching a deal than they were at the end of last year. With revamped trade tensions at the forefront, global stocks retreated 5.9%.
October lived up to its billing as the “worst month,” with the global MSCI All-Country World Index falling 7.5%, leaving the index down 4% for the year. US stocks, which had held up amid weakness abroad, fell 6.8% in October. Bonds, which usually zig when stocks zag, also saw selling pressure as interest rates rose.
The sharp 10% correction in stocks earlier in the year seems like a distant memory. Domestic equity markets regained new highs in the third quarter as the ongoing narratives surrounding shaky emerging markets, never-ending Brexit negotiations, rising interest rates, and trade tensions failed to dent confidence.
The S&P 500 returned 3.7% while the broader MSCI All-World index gained 3.0% in July, recording the strongest gains for stock markets since January and putting the S&P within 50 points of its all-time highs. Monetary policy changes are underway and, for now at least, the economy and the markets are relatively undisturbed.