To quote C. Louis Leipoldt, ‘Dit is die maand Oktober, die mooiste, mooiste maand’, but to an investor, historically October is also a month of uncertainty with declining markets and the odd crash. In October 2024 some markets recorded new record highs, yet most ended the month in the red. Renewed geopolitical risk, concerns about the Fed not being as aggressive in their rate cutting cycle, as well as the looming US elections, all contributed to the October market turbulence.

All three major US indices ended the month weaker despite hitting new record highs during the month. The Dow ended the month lower by 1.3%, the S&P 500 also lower by 1.0% and the Nasdaq, which hit an all-time high on the 25th October, ending the month lower by 0.5%. The latter was due to a sell-off on the 31st October on the back of poor quarterly reports form tech heavyweights Apple, Meta and Microsoft. On the economics front, US September inflation data had printed slightly higher than market expectations, with CPI printing at 2.4% YoY compared to the August print of 2.5% YoY, while US Core CPI, which excludes energy and food, printed at 3.3% YoY vs the 3.2% YoY August print. The US September retail sales also came in better than expected, rising by 0.4% MoM vs the 0.1% print of August, while the September core PCE number, a key Fed inflation gauge, printed in line with expectations, up 2.7%, unchanged from August. US third quarter GDP printed at an annualised rate of 2.8%, marginally softer than expected and below the 3.0% reading of the second quarter, with government outlay and consumer spending being significant contributors to US GDP growth.

Europe initially took heart from the ECB’s third 25 bps cut for the year, but as markets and sentiment moved, these ended the month lower, with the Dax down by 1.3% and the CAC weaker by 3.7%. On the economics front, inflation in the eurozone for September fell below the ECB’s 2% target, printing at 1.8% YoY, while core inflation (ex-food and energy) printed at 2.7%, softer than the 2.8% print of August. German inflation for September also fell, printing at 1.8% YoY from the 2.0% print in August, while inflation in France experienced a sharp drop to 1.5% YoY from the 2.7% YoY print in August. We saw the economy expanding in the euro area at 0.4% QoQ vs market expectations of a 0.2% QoQ print, as the German economy avoided a recession, and the French economy receiving a boost from the Paris Olympics.

In the UK, the FTSE ended October lower by 1.5%, with UK September inflation also dropping sharply to 1.7% YoY, vs the 2.2% YoY August print, and below the BoE’s 2% target rate. The UK’s new Chancellor of the Exchequer, Rachel Reeves, announced the biggest tax increases in the UK in almost 30 years, which is inflationary, and as a result, the expectation is for the BoE to hold rates steady at its November meeting.

Asian Markets had a mixed October, with markets in China running out of steam post the stimulus induced run, as the Hang Seng ended the month lower by 3.9% and the Shanghai Composite weaker by 1.7%. Chinese economic data for September saw both retail sales (printing at 3.2% YoY) and industrial production (printing at 5.4% YoY), coming in better than market expectations, with an unexpected easing of inflation (printing at 0.4% YoY), adding to the mix. The economy in China saw third quarter GDP coming in at 4.6% YoY, in the middle of the 4.5% YoY market consensus forecast and the 4.7% YoY print of the second quarter. The manufacturing PMI for October printed at 50.1, the first expansion since April, coming in higher than both the 49.8 August number and the consensus forecast of 49.9, while non-manufacturing PMI came in at 50.2, from the 50 in September. Note that the 50-point mark separates contraction from expansion.

Contrasting with China, Japan’s Nikkei ended October higher by 3.1% with headline CPI for September falling to 2.5% versus the August figure of 3.0%, with core CPI printing at 2.4% YoY vs the August print of 2.8%. This was on the back of the rollout by the Japanese government of temporary subsidies to assist with utility bills, which are expected to have an impact on future inflation. Unlike its European and US counterparts, the BoJ kept its benchmark rates at around 0.25%, with incoming Prime Minister, Shigeru Ishiba, stating the country was not yet ready for another rate hike.

South Africa 

Although still basking in the political glow of the GNU, local markets followed the international trend as the ALSI ended lower by 1.3%. Weakness was spread throughout underlying markets with the property index lower by 4.4% for the month, industrials lower by 3.1%, financials weaker by 1.6%, though an increase in the platinum and gold prices pushed the resources sector higher by 2.3%. Several large cap counters were weaker for the month, such as Prosus down by 2.5%, Naspers by 1.2%, BHP Group lower by 8.8%, and Anheuser-Busch InBev lower by 7.9%.

September headline inflation eased further to 3.8% YoY from the 4.4% YoY in August, reaching its lowest level since March 2021, raising hopes that there might be a continued easing in monetary policy. Core inflation remained unchanged from the August print of 4.1% YoY, with retail sales for August increasing by 3.2% YoY.

Finance Minister, Enoch Godongwana, delivered the October 2024 MTBPS, which reiterated Treasury’s commitment to fiscal consolidation and stabilising the country’s debt to GDP ratio by 2025/2026. Some revisions were made to the budget forecasts of 2024, hinting at weaker fiscal ratios due to an expected shortfall in tax revenue, and increased spending, while also lowering the 2024 growth forecast to 1.1%, down from the 2024 budget forecast of 1.3%.