Markets move past US shutdown to post broad gains, says S&P’s Silverblatt

Strong majority of markets were up in October, Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, reports.

All eyes were on the US for the first half of October as the failure of congress to agree a budget led to a government shutdown. In retrospect, disruption was controlled. The quantifiable short term impact is estimated (by S&P Economics) to be USD 24 billion and a 0.6% reduction in Q4 GDP.

The longer term cost is expected to be measured in increased uncertainty in investment by companies and greater nervousness among consumers – which may well result in reduced spending. Markets reacted well during the closure, and actually increased slightly (up 3.78%). After the ‘fix’ – which was merely a temporary solution until January – the ‘relief’ rally came. Turning to the Fed, next January’s change in management combined with uncertain economic data suggest that policy will remain unchanged until the New Year.

Japan sole decliner among developed markets
Developed markets added 3.68%, with Japan the sole decliner at -0.04%. Greece added 15.43% to lead all markets year-to-date with a 40.72% gain – although their 3-year return is still deeply in the red, off 35.87%. Italy was the other double-digit winner, adding 11.74%, as Spain gained 9.00%. The year-to-date gains for developed markets are impressive at 20.19%, with the ex U.S. gain standing at 15.99% (the U.S. is up 24.29%).

India leads emerging markets, but half remain in the red year-to-date
Emerging markets added 4.69%, with Colombia the sole decliner (off 0.24%) India did the best, rebounding 11.07% but still off 7.33% year-to-date. Egypt added 9.50% for the month, as it broke into positive year-to-date territory. October gains helped emerging markets reduce their year-to-date decline to 1.19%, though half the markets remain in the red year-to-date.

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