8th Nov 2019

Key points

• Global equities outperformed bonds in October as trade risks abated, US earnings impressed and central bank easing supported sentiment.
• The economic outlook for Australasia improved and the associated higher interest rates reduced the value of fixed income assets. Equities underperformed their global counterparts due to sectoral weakness in electricity, banking and materials stocks.
• We retain a degree of scepticism in the macro outlook. The global backdrop has improved but remains fragile. Domestically, large amounts of monetary stimulus have been delivered but confidence is poor and activity soft.
• This environment should favour growth stocks where Harbour equity portfolio exposure is concentrated alongside maintaining exposure to several defensive investments. Within fixed interest portfolios, we reduced duration in October but remain long relative to benchmark given soft economic activity and residual risk.

Key developments
Global equities outperformed bonds in October as trade risks abated, US earnings impressed and central bank easing supported sentiment. At the time of writing, 78% of S&P500 companies had beaten Q3 earnings expectations and no sector had less than 58% of companies beating analyst earnings estimates. The MSCI All Country World Equity Index (local currency) increased 1.8% while the Bloomberg Barclays Global Aggregate Bond Index (hedged into NZD) lost 0.2%.

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