Citi Personal Wealth Management

A Red October

Monthly Market Snapshot: October 2018

Highlights

Global stock markets tumbled in October. In the U.S., the S&P 500 finished the month 6.9% lower – leaving the index up just 1.4% for the year. Equities outside of the U.S. have fared even worse with the MCSI All Country World Index (excluding the U.S.) sliding 8.2% during the month. A number of factors have contributed to the sell-off: signals of tighter Fed policy, geopolitical tensions (China, Saudi Arabia, etc.), the upcoming U.S. mid-term elections, slowing global growth, and a re-rating of earnings expectations.

We see recent developments as part of a normal market correction (meaning a sell-off of at least 10%). Importantly, we do not see this as the end of the bull market, nor the end of the business cycle. Corporate profits, economic growth, and consumer sentiment each remain fairly robust. It is always difficult to identify a bottoming in equity markets, but we suspect that the latter months of this year will be more positive.

Citi Private Bank’s Global Investment Committee (GIC) remains slightly overweight global equities, but has reduced its exposure and is actively increasing portfolio quality. As part of this reduction, the GIC has reduced its weighting on small- and mid-cap U.S. stocks from neutral to a slight underweight. Preferred assets include short-duration U.S. Treasuries and corporate debt.