US equity markets fell during October as cases of Covid-19 reached new daily records and news of rising infection rates and lockdowns in Europe affected sentiment amongst US investors.
To view the series of market updates through October, click here
- The VIX Index rose to its highest level since June
- There was no agreement over coronavirus relief funding
- The DJIA fell to its lowest level since July
US equity markets fell during October as cases of Covid-19 reached new daily records and news of rising infection rates and lockdowns in Europe affected sentiment amongst US investors. Concerns over the pandemic’s impact on the country’s economy were intensified by a continued stalemate between the Republican and Democratic parties over Covid-19 relief funding. Warning “the expansion is far from complete”, Fed Chair Jerome Powell said that the US could face ““tragic” consequences and “unnecessary hardship for households and businesses” if the government fails to provide sufficient support. According to Johns Hopkins University, confirmed cases in the US had risen above nine million and reported deaths had reached 229,686 by the end of the month.
“Investors were on edge during October ahead of the US Presidential election”
Investors were on edge during October ahead of the US Presidential election on 3 November. Although polls indicated that Democrat candidate Joe Biden was holding a lead over incumbent President Donald Trump, investors hoped for a clear result that would bring an end to the ongoing uncertainty. Over 85 million of eligible voters had cast their votes by the end of October, according to S&P Dow Jones Indices. Meanwhile, the VIX Index – which measures expected levels of volatility in US equity markets and is also known as the “fear index” – rose to its highest level since June.
During October, the Dow Jones Industrial Average Index fell to its lowest level since the end of July, and ended the month down by 4.6%. The technology-heavy Nasdaq Index fell by 2.3%, and the S&P 500 Index declined by 2.8%. Over October, the best-performing S&P industry sectors were utilities and communication services, which were the only sectors to end the month in positive territory. In comparison, information technology, energy, health care, and real estate performed poorly.
During the third quarter of 2020, the US economy expanded at an annualised rate of 33.1%, having shrunk by 31.4% in the three months to June. Elsewhere, although the rate of unemployment fell for a fifth consecutive month in September, dropping from 8.4% in August to 7.9%, it remained significantly higher than February’s rate of 3.5%. Amid signs that the labour market remained under pressure from the impact of the coronavirus pandemic, the US economy added only 661,000 new jobs during September, compared with larger gains in the previous four months.
