Following a turbulent September where we saw the equity market having the worst performance during the year, in October we saw the market reaching new highs during the month as the market returned to the optimism they’ve been carrying during the year. The optimism was fuelled by the start of earnings season as we saw strong earnings reports and positive management outlook. One consistent issue which has been affecting companies has been the ongoing supply chain issues which is affecting earnings. Supply shortages have been fuelled by labour scarcity and bottlenecks amongst other factors. Margins are expected to be impacted for longer than expected and these price increases are being shifted towards the consumer.

Some notable disappointments were Amazon which is experiencing labour shortages and as a result they are anticipating an additional $4bn related to labour and other expenses. Apple also announced that they are experiencing delays in some of their older devices like iMac and Mac Pro; they also stated that their new products order’s (i.e., iPhone 13, ninth-generation iPad, MacBook Pro and Apple Watch Series 7) won’t be fulfilled until November or December. The overall MSCI World index was up 5.7% for October. Growth outperformed value this month with the MSCI World Growth Index reporting gains of 6.7% while MSCI World Value was up 4.6% for the month. In terms of fund performance, our best performers were Nvidia (23.4%), Microsoft (17.6%) and Intuit (16.2%). While the lagers were Heska Corp (-13.5%); HelloFresh (-12.6%) and PayPal Holdings (-10.6%).

Microsoft issued their Q1’22 results and beat market expectations. Microsoft Cloud’s quarterly revenue was up 36% y/y, surpassing the $20bn quarterly mark for the first time ever. At group level, they recorded their fastest revenue growth rate since 2018 of 22% to $45.3bn. Operating income was up 11% to $11.4bn and net profit was up 48% to $20.5bn. The company is investing more in cloud engineering, sales, gaming, cybersecurity, and customer deployment. They are in the process of closing the acquisition of Nuance Communications, a speech recognition and AI company in the healthcare industry. Investors were please when Intuit announced, ‘Money by QuickBooks’ which is a mobile app which will give small business owners the ability to accept payments and manage their expenses; it has features such as “debit card and bill payment capabilities”. They also announced that they’ve completed the acquisition of Mailchimp- an email marketing company. It appears the rationale behind this acquisition is to get Mailchimp’s database on small- and-medium-sized businesses, then integrate this into Intuit’s platforms to help Intuit growth in that market segment. The company is releasing their Q1’22 earnings on 18 November so investors are probably interested to hear how Mailchimp will be getting integrated. The fall in PayPal was due to the news that the company was looking to acquire Pinterest for $45bn which would have been the largest acquisition of a social media company, but this potential acquisition seemed to confuse the market. A few days later however, it was announced that this deal will not be going through. I think the reason PayPal initially pursued this acquisition was so that they can diversify their income through advertising revenue.

What we can expect is continued volatility as the market has been very sensitive towards any changes in the monetary policy. The Fed has reiterated many times that inflation is transitory but at the moment the global economy seems to be moving from one source of transitory inflation to the next, this could mean that elevated inflation levels could stay way longer than what the market is expecting. How long this will be is unknown. However, earnings season is still underway which could boost share prices and based on historical data over the past 10 years, November is generally the best month for market returns so it is possible that we may see highs.