The financial industry fears the month of October, after all, that was the month for the 1987 share market crash, and also the 1929 Wall St crash.  Ironically, it is actually September which has the worst average returns, (as measured by the Dow Jones) with an average 0.8% loss according to Stock Traders Almanac. Throw in September and October 2008 and you have good reason to be paranoid.

But October 2018 did nothing to alleviate the suspicions of share market participants.

Australian shares were -6.05% for the month, bringing the rolling twelve month number down from 13.97% at the end of September to a meagre 2.94% for the twelve months to end of October.

International shares were slightly less impacted, with the market -5.40%.  Rolling twelve months came down to 9.6%, well off the 21.29% rolling twelve months to the end of September.

The Australian Real Estate Investment Trust (A-REIT) sector also fell, though less so than Australian Shares.  It is instructive to consider that A-REIT returns for the month were ‘only’ -3.12% but for the rolling twelve months returned 7.31% versus Australian shares at 2.94%.

We have not been fans of Global REIT’s for with the outlook on US rates rising more rapidly than Australia, and hence more downside in those markets. The results in October and the rolling 12 months support that view.

  INDEX RETURNS AS AT 31 October 2018 (%)
  1 month 3 months 6 months One year
Australian Shares -6.05 -5.92 -0.42 2.94
International Shares -5.40 -0.94 4.30 9.60
Domestic Listed Property -3.12 -2.13 4.06 7.31
Global Listed Property -3.18 -3.78 1.30 2.10
Australian Fixed Interest 0.48 0.87 2.21 3.09
International Fixed Int -0.23 -0.32 0.24 0.19
Cash 0.17 0.49 1.01 1.89
Market Indices
S&P/ASX 200 Accumulation Index
MSCI World ex Aust TR Index $A
S&P/ASX 300 Property Trusts Accum Index
FTSE EPRA/NAREIT DEVELOP NR INDEX (A$ HEDGED)
Bloomberg Composite 0 + Years
BarCap Global Aggregate Index Hedged AUD
Bloomberg Aus Bank Bill Index

The Australian sharemarket has now produced that 10% annual fall that we expect as a normal occurrence in most years, as pointed out in this blog; Perspective on recent sharemarket volatility.

If the October decline was nothing more than the normal correction, then it may prove to be the best buying opportunity of the year.

Fixed interest markets in Australia were positive for the month, returning 0.48%. Global bonds however produced a negative return in October as the ten year bond rates in America rose from 3.05% to 3.15%. The rolling one year return for global bonds is now a meagre 0.19% which is even less than cash.  The American ten year bond yield has increased from 2.37% this time last year to 3.15%.   

If you want to get more involved with your superannuation, investments or insurance, please give us a call at Quill Group.