October proved to be another challenging month for equity markets, with both Canadian and U.S. stocks experiencing declines, measured in USD. The S&P/TSX Composite Index fell for the third consecutive month, while the S&P 500 Index fell into correction territory. Investors have taken a risk-off approach amid rapidly rising U.S. Treasury yields, elevated geopolitical risks, and expectations that interest rates will remain higher for longer.

Canada’s benchmark S&P/TSX Composite Index was 3.4% lower in October, as all but one of the underlying sectors were negative during the month. The health care sector was the biggest drag on the index, with a decline of 12.8% in October. Real estate, information technology and utilities fell by 6.3%, 6.2% and 4.7%, respectively. Consumer staples was the only positive sector, gaining 3.7%. Small-cap stocks, as measured by the S&P/TSX SmallCap Index, fell 2.7% for the month. The U.S. dollar rose by 2.2% versus the loonie during the month, boosting returns of foreign markets from a Canadian investor’s standpoint. Note that all returns in this paragraph are in CAD terms. U.S.-based stocks, as measured by the S&P 500 Index, rose 0.2% in October. Seven of the underlying sectors were in the red for the month, with energy and consumer discretionary as the leading detractors, falling 3.8% and 2.2%, respectively. Utilities was the top-performing sector, gaining 3.7%. International stocks, as measured by the FTSE Developed ex-US Index, declined 2.0% during the month, while emerging markets fell 1.4%.

The investment grade fixed income indices we follow posted mixed returns in October. Canadian investment grade bonds, as measured by the FTSE Canada Universe Bond Index, rose 0.4% during the month, while the key global investment grade bond benchmark and global high-yield issues both fell 1.2%. Turning to commodities, natural gas prices rose 22.1% during the month, while the price of a barrel of crude oil fell 10.8%. Copper declined 2.4%, while silver and gold had a positive month, rising 2.2% and 7.9%, respectively.

Inflation in Canada fell to 3.8% year-over-year in September, led by declines in costs for food and durable goods. The Canadian economy created 63,800 jobs in September, as the nation’s unemployment rate stood at 5.5%. At its October25 meeting, the Bank of Canada left its key interest rate unchanged at 5% for the second consecutive month. U.S. nonfarm payrolls increased by 336,000 in September, as the unemployment rate stood at 3.8%. The consumer price index remained steady at 3.7% year-over-year in September. The U.S. personal consumption expenditures price index increased 0.4% month-over-month. The Federal Reserve held its benchmark rate steady in October at a target range of 5.25% to 5.50%.

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