Requiem For October.

Well, I suppose it’s only fitting that October closed with a bang and mercifully, it was a bang in the “right” direction.

The S&P finished the month with the best two-day rally since the February chaos, while big-cap tech managed to log what looks to me like the sixth-best day of 2018, soaring 2.3%.


Wednesday was yet another day where a big rally was accompanied by huge outperformance in Growth versus Value, a continuation of the October trend where wild swings in relative performance between the two effectively determined the direction of the broader market.


In a testament to the rotation, the iShares Russell 1000 Value ETF saw the largest monthly inflow of the year in October.



That ETF outperformed its Growth counterpart by the widest monthly margin since January 2008 this month.


“Since the start of Q3, investors have been rotating out of Growth into Value”, Barclays wrote this week, adding that “as a result, the three biggest US Value equity ETFs in terms of AUM are now recording net inflows on the year, while Growth equity ETFs are having outflows.” That’s pretty remarkable.



Wednesday’s tech rally wasn’t even close to enough to keep October from being the worst month for the Nasdaq 100 of the entire bull market.


The S&P’s impressive two-day run helped the index trim this month’s losses to “just” 7%, but that’s small comfort to hedge funds, which were crushed. The Nasdaq’s tough month put a ton of pressure on the Long/Short crowd, which has of course piled into consensus longs/crowded trades. As Nomura’s Charlie McElligott reminds you, “it’s all one big liquidity trade”:


(Nomura, Bloomberg)

Here’s CDX.HY spreads, but I would again remind you that October’s widening looks like a blip if you pan out on this chart even to 2016.


This was among the worst months for emerging market equities since 2012. Here’s the ETF’s monthly loss:


EM FX was a study in contrast (MXN crushed for obvious reasons, BRL rallying for equally obvious reasons and as far as TRY goes, I wouldn’t trust recent gains there if my life depended on it):



Here’s DM bonds on the month:



As far as the VIX goes, Goldman’s Rocky Fishman reminds you that “10% sell-offs without the VIX hitting 30 have been historically uncommon, but are not unprecedented.”



Finally, as you look forward to the midterms and ponder the outlook for a hobbled equity market into year-end, just remember that it’s always someone else’s fault…

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