Following on from the historic September,October was equally eventful marked by large equity market swings, negative investor sentiment, global co-ordinated monetary policy action and unprecedented and large scale government bailout plans for banks. Commodity prices continued to fall while corporate bonds priced in high levels of expected default rates. Stock markets globally had a rocky month, tumbling lower on the back of increased investor panic and recession worries.The MSCI World index suffered its worse month in October since October 1987 while MSCI Emerging Markets experienced their worst month since August 1998 (Russian Debt Default). The volatility index, VIX, reflected the large day-by-day market swings, hitting record levels over the month. From a portfolio perspective, rationalising the market moves by fundamentals became virtually impossible in a market led by emotion.As the month wore on and as more companies reported slowdowns in earnings, worries about global recession, its depth and duration, grew. We added to equities via an ETF when markets hit a low point and although markets see-sawed they ended the month higher than mid October levels. With oil prices falling we also took the opportunity to purchase an Oil ETF. Both purchases were taken from our cash position, rather than through any sales in the portfolio.Yields on corporate bonds began to look more attractive as markets priced in extremely high efault levels. Late October we increased our exposure in the asset class through the purchase of two top quality, actively managed portfolios in that space, Invesco Perpetual Corporate Bond and M&G Optimal Income.Both funds are run by experienced managers, Invesco's Paul Causer and Paul Read and M&G's Richard Woolnough, a preference we continue to have across the portfolio in light of such difficult market conditions. Although in the short term we are cautious with markets being led by sentiment, over the medium term we are more optimistic as rescue packages and interest cuts begin to ease the credit markets.
121.02p
