3rd November 2016

Banks lead market performance in October

Following June’s EU Referendum, the UK economy has recovered from a short-term wobble and has remained steady. However Brexit is very much back on the agenda after the Government lost its court case on triggering Article 50.

Over the course of October a number of markets showed growth but it was banks in both the US and UK which rose the most; on the back of better than expected results in their Q3 announcements.

Market performance in October 2016
Past performance is not a reliable indicator of future returns
Source: Morningstar Direct as at 31st October 2016.

This despite the weak pound. In fact, the UK market is still benefiting from weaker sterling, however the weak currency could lead to a rise in inflation in the longer term. So far this looks like a healthy and welcome rise and expectations are that it will be containable.

Speaking about the performance of markets in October, Michelle McGrade said:

"Post EU Referendum vote, the UK economy is doing okay, consumers, manufacturers and service providers all seem to be doing well – better than the doomsters were predicting. The helpful hand given to Nissan to give it confidence to invest in a new plant here is also a boost."

Can we see a trend emerging?

The growing influence of emerging markets was noticeable last month. It was the fourth highest performing market throughout October, comfortably higher than the FTSE All Share average. Additionally, according to data on what TD customers bought and sold in October, the Jupiter India fund was the fourth most bought – indicating an appetite for exposure to emerging markets among our customers.

We have recently covered the benefits of emerging markets for a diversified portfolio. If you missed this report, take a look at our new infographic for more on emerging markets.

All eyes on the US

October saw the start of Q3 earnings season over on Wall Street, and our customers responded to the opportunities this created with several new names coming into the most popular trading list.

Based on analysis from FactSet, the blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings growth rate for the S&P 500 is above the year-over-year blended decline at the end of last week and the year-over-year estimated decline at the end of the third quarter (30th September). If the index reports growth in earnings for the quarter, it will mark the first time the index has seen year-over-year growth in earnings since Q1 2015.

In TD customer trading, October saw Apple hold the top spot, although as we’ve seen over the last few months, its stock is also one of the most net sold (along with cable TV giant Liberty Global).

Moving up in the rankings were Amazon and Google owner Alphabet, the latter surprising Wall Street analysts with strong earnings growth over the summer. These two tech giants pushed Facebook down the rankings, although that may change following the Facebook earnings, which came out yesterday (2nd November).

But next week will be all about the election result (due early on 9th November 2016) and, according to Michelle McGrade, “the markets are suddenly jittery about the outcome of the election.”

Take a look at our top tips to be ready for any US election volatility.

Don’t forget to take a look at our Autumn Investment Outlook for more opinion on the US and the UK economies and other markets of interest.

Investing in Emerging Market Investments involve different risks from the UK markets, in many cases the risks are greater.

The value of international investments are affected by currency fluctuations which might reduce their value in sterling.

Our most popular investments should not be taken as a personal recommendation to buy or sell a particular fund or stock. Instead it is simply an indication of the general buying and selling trends of our customers observed in the period stated.

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