Key Points:

  • After a volatile month, the S&P 500 gave in most of its gains year to date, losing 6.5% from its September peak. Global equities lost 6.4% over the month, with continued rotation in styles from growth to value and from cyclicals to defensives.
  • Although reported profits look intact in the US, there have been concerns around corporate guidance and some big headline misses, although it doesn't appear meaningful enough to rationalize the price action. We believe the selloff was driven by a variety of perceived macro risks, while the extent of the sell-off appears to be related to technical factors.
  • We remain overweight global equities in our cross asset allocation as the fundamental backdrop is still supportive and maintain our preference for US equities given the earnings backdrop underpinned by robust corporate activity.

Global equities lose 6% over the month; continued rotation from cyclicals to defensives

After a volatile month, the S&P 500 gave in most of its gains year to date, losing more than 6% from its September peak. Global equity markets lost 6.4% over the month, with Switzerland (-1.5%) posting the smallest decline, while Japan (-10%) and emerging markets (-6.6%) fell more heavily (Exhibit 1). At the sector level, utilities was the only sector to hold its ground (0.1%), while other defensive plays like consumer staples (-0.7%) and telecoms (-4.4%) also outperformed. Commodity sectors (energy -10%; materials -7.5%), industrials (-9.5%), technology (+8.4%) and the consumer discretionary (-7.3%) space performed poorly with limited differentiation. Continued rotation in equity styles from growth (-8%) to value (-4.5%) and from cyclicals (-7.2%) to defensives (-4.7%) was also visible over the month (Exhibit 2). October also witnessed a surge in volatility with the CBOE Volatility Index rising to 25, its highest level since the volatility spike in the first quarter of 2018.





This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

This document has been edited by AXA INVESTMENT MANAGERS SA, a company incorporated under the laws of France, having its registered office located at Tour Majunga, 6 place de la Pyramide, 92800 Puteaux, registered with the Nanterre Trade and Companies Register under number 393 051 826. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.


© AXA Investment Managers 2018. All rights reserved