October Review: Top-Performing Asset Classes

Large-cap stocks outperformed both mid and small caps in all the leading markets in October, while corporate bonds were led by high yield offerings

Andy Brunner 11 November, 2013 | 12:09AM

At the asset class level, trends in October were fairly similar to the previous month, with nearly all the main assets producing positive returns. The exception was commodities, but elsewhere the general rule was the riskier the asset the higher the return. From a performance perspective, equities topped the tables followed by corporate bonds led by high yield. Government bonds also produced very decent returns as yields retreated but UK commercial property is now recording monthly gains in excess of 1% for the first time this cycle. After a sizeable advance lasting several months, sterling drifted lower adding to returns on overseas investments for UK-based investors as can be seen in the following table:

Corporate and Government Bonds

October produced a second consecutive month of decent returns for fixed income markets. A growing belief that the Fed might not begin curtailing bond purchases until next March, alongside weaker economic data, kept US 10-year Treasury yields tumbling to around 2.5%. Treasuries were followed downwards by yields in the other main government bond markets. Returns were broadly similar amongst the main markets at 0.5%, but EU peripheral governments staged another strong rally as carry trades resumed and confidence in the recovery grew.

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK

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