“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” So said Mark Twain many years before the 1987 stock market crash, which occurred during the October of that year.
October 2014 was certainly a dangerous month to speculate, but then – as Mark Twain was implying – speculation is hazardous at any time. Anecdotal reports suggest that some hedge funds suffered large losses as their ‘bets’ turned sour. There was certainly plenty to unsettle investors:
- Ebola suddenly appeared on investors’ radar, hitting travel-related companies.
- The IMF cut its forecast for global economic growth.
- Fears that the Eurozone crisis could re-emerge prompted yields on 10 year Greek Government bonds to jump up to 9%.
- The month marked the end of the Federal Reserve’s bond-buying programme of quantitative easing (QE).
- China reported economic growth in the third quarter had reached a five year low.
- The oil price, which had dropped below $100 a barrel in September, kept on falling, reaching the low $80s by the middle of the month.
However, there was a lot of glass-half-empty about the market’s concerns:
- Ebola is almost entirely confined to three West African countries, not on many travellers’ itineraries.
- The IMF growth forecast cuts were only 0.1% (to 3.3%) for the current year and 0.2% (to 3.8%) for 2015.
- The Eurozone scare quickly disappeared and Greek bond yields retraced much of their rise.
- The Fed confirmed the end of QE on 29 October, but kept to its mantra that interest rates would remain low “for a considerable time.”
- China’s growth was still running at an annual 7.3%, a rate most countries would envy.
- Falling oil prices had as much to do with increased supply (from US shale deposits) than reduced demand and are an effective tax cut for consumers in most Western economies.
By the end of the month the markets had largely regained their composure. So in the end, October was – as Mark Twain wryly indicated – just another month.