Simon’s Market Minute
October was a month of rising energy prices, concerns around inflation, some sharp swings in US technology shares and speculation regarding the potential outcomes of the US Midterms in early November.
The ongoing conflict in the Middle East continued to put pressure on energy prices, with Brent crude oil rising above $110 a barrel towards the end of the month. Despite reports that oil supplies from the region were recovering, disruption to key shipping routes and uncertainty around the conflict kept prices elevated. The G7 countries also agreed to release 100 million barrels of oil and diesel from their reserves in an attempt to ease the pressure on prices.
Here in the UK, inflation rose to 3.5%, driven largely by higher fuel costs, while unemployment unexpectedly fell to 4.7%. Both figures increased expectations that the Bank of England may need to raise interest rates again (which has indeed just been announced). Government borrowing costs also remained high, with 30-year gilt yields briefly rising above 6% for the first time in nearly three decades.
The Autumn Budget was relatively uneventful compared with some of those we’ve seen in recent years, with no major surprises for investors. UK markets reacted positively, helped by strong results from companies such as BP and Shell, which have benefited from higher energy prices. There was also some welcome news for savers, with the Government confirming that the annual Cash ISA allowance will remain at £20,000. You can read my blog dedicated to the UK Budget here:
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Across the Atlantic, US markets experienced another difficult period, particularly among the major technology companies. While demand for artificial intelligence continues to grow, investors have become more cautious about the enormous sums being spent on developing the technology. Results from companies including Alphabet, Amazon and Meta showed just how much money is being committed to AI infrastructure, leading to some sharp falls in their share prices. That said, the S&P500 reached a new record high earlier in the month, showing how quickly sentiment can change.
US inflation also rose to 3.7%, adding to expectations that the Federal Reserve may need to increase interest rates further, following on from their September hike. Meanwhile, the International Monetary Fund warned that high energy prices, rising government debt and the concentration of investment in AI could create challenges for global economic growth. Elsewhere, the US and other G7 countries continued efforts to stabilise global energy supplies, while markets remained sensitive to developments in the Middle East and the outlook for interest rates.
Overall, October was another reminder that different parts of the market don’t always move in the same direction. While technology shares, particularly those in the US came under pressure, UK markets benefited from stronger performance in more traditional sectors. It’s a good example of why we continue to favour a diversified investment approach rather than relying too heavily on any one sector or geographical region.
Written by Director, Simon Warne
This article is based on our understanding of legislation and events at the time of publication. It is provided for general information only and should not be regarded as financial advice. We recommend seeking advice from a suitably qualified professional before making any investment decisions. The value of investments can fall as well as rise, and you may get back less than you invest.
