October 2020 saw some solid stock market gyrations. The month is traditionally the most volatile, as the VIX, the fear gauge index, tends to top in October, according to Macro Risk Advisors, as
quoted on CNBC.
This October was no different with stocks seesawing on election uncertainty. Failed stimulus talks, subdued tech earnings and rising coronavirus cases on the global front were the added Wall Street woes. The S&P 500, the Dow Jones and the Nasdaq composite lost about 3.3%, 4.7% and 3.7%, respectively, in the month.
Against this backdrop, below we highlight a few ETF winners and losers of October.
The yield curve steepened in October. Still-strong stimulus hopes despite President Trump’s announcement of a halt in stimulus talks led to the rise in long-term bond yields. The benchmark U.S. treasury yields gained 20 bps to 0.88% in October while the two-year treasury yields hovered in the range of 0.13% to 0.18%.
As banks seek to borrow money at short-term rates and lend at long-term rates, a steepening yield curve will earn more on lending and pay less on deposits. This will expand net margins and increase banks’ profits. As a result, all banks gained and
SPDR S&P Regional Banking ETF ( KRE Quick Quote KRE - Free Report) added the highest return of 15.3%. Nigeria Global X MSCI Nigeria ETF ( NGE Quick Quote NGE - Free Report) added about 20% in October as Nigerian stocks jumped the most in more than five years. It was one of the best global equity gauges in October. A Bloomberg article noted that local investors are betting big on the stock market in search of returns as yields on government debt declined after a surprise September rate cut, which was aimed at boosting the economy in Africa’s largest oil producer amid the coronavirus-led crisis. China
China has apparently shown signs of steady recovery from the coronavirus-led slowdown. China’s manufacturing sector has been expanding steadily. In mid-October, Chinese domestic equities became worth more than $10 trillion
for the first time since 2015, when a record crash occurred in the Chinese market due to yuan devaluation. Invesco China Technology ETF ( CQQQ Quick Quote CQQQ - Free Report) (up 7.61%) and GLOBAL X MSCI China Consumer Discretionary ETF ((up 7.3%) are the winners. CHIQ Quick Quote CHIQ - Free Report) Laggards Europe
As coronavirus cases surged in Europe, many countries like Germany, France and the United Kingdom imposed new restriction measures and stay-at-home mandates. This has stirred fears of a deeper slowdown in the coming days.
iShares MSCI Poland ETF ( EPOL Quick Quote EPOL - Free Report) (down 15%), Global X MSCI Greece ETF (GREK) (down 10.4%), and Franklin FTSE Germany ETF (FLGR) (down 10.3%) and SPDR Euro Stoxx 50 ETF ( FEZ Quick Quote FEZ - Free Report) (down 7.6%) were among the key laggards. Cocoa A Bloomberg article noted that fewer Americans decided to celebrate trick-or-treat this Halloween with the rising numbers of COVID-19 infection. This probably weighed on the cocoa prices. iPath Bloomberg Cocoa Subindex Total Return ETN ( NIB Quick Quote NIB - Free Report) lost 10.2% in October.
Data released in mid-October indicated that cocoa processing in Europe dropped 4.7% in the third quarter to the smallest for that period noticed in four years. North America bean grinding slumped 4% to the minimum level for the period in 12 years, while processing plunged 10% in Asia.
Homebuilding iShares US Home Construction ETF (lost 8.2% in October probably due to the rise in bond yields. The benchmark U.S. treasury yields gained 20 bps to 0.88% in October. ITB Quick Quote ITB - Free Report) SPDR S&P Homebuilders ETF ( XHB Quick Quote XHB - Free Report) lost about 5% in the month. Want key ETF info delivered straight to your inbox?
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