Have we passed the peak of supply disruption?
Last week we noted that October had picked up for investors where September had left off, namely equities
slowly climbing down from the heights gained over the summer. As petrol availability returned even to
London’s suburbs and temperatures outside rose again, so it seemed did global stock markets. Despite
broader UK news flow still very much on the gloomy side, stock markets around the world turned positive
for October, and drove diversified investment portfolios back above where they had started the month.
The state of the global economy
By most measures, economic growth has been disappointing over the last few months. Economists started
the year with high expectations for the post-pandemic recovery to become a sustained expansion –
optimistic that vaccines and rebounding confidence would spur activity. The hope was that COVID
conditions would normalise while monetary and fiscal policy remained supportive, leading to a virtuous
growth cycle with higher wages, credit growth and global demand well into 2022. Quite a few economists
were even worried demand could prove too strong and cause rapid and damaging inflation. And even
though most would have expected a slowdown in the second half of this year, a few factors did not quite
turn out as expected in the summer and autumn months.
Q3 corporate earnings: rays of hope or shadows of doubt?
Colder winds and autumn leaves are not all that October brings. For investors, the end of summer marks
another quarter done and a season of corporate earnings results ahead. Companies began announcing
profits last week, amid a notable cooldown in global economic activity. Analyst expectations are
nevertheless reasonable for most companies. Growth may have slowed unexpectedly over the last three
months, but earnings-per-share (EPS) has been solid.