The ASX200 ended its penultimate week of October down -1.2% with the damage unfolding over the last 2-days hence going into the weekend the market actually felt far worse, however, the market remains up over 200-points for the month – it certainly doesn’t feel like it! Yet again the Energy Sector was best on the ground while the Utilities Sector carried the wooden spoon. We can see the local index remaining in the 6600 – 6800 trading range into next month although we still believe the risks are on the upside.

• Equities feel like they are treading water ahead of the Fed’s next interest rate decision on the 2^nd of November.

As we see some stocks reveal their sins in quarterly updates one thing remains very clear i.e. misses will not be tolerated and especially for stocks that are priced for any degree of growth.

• Investors are comfortable in cash hence companies need to perform to avoid a stampede for the exit door –  classic bear market sentiment.

The global/local macro news continues to cross our screens at a rate of knots from the UK losing another PM, to China listening to Xi Jinping’s plans for the next 5-years, Australia’s unemployment rate holding at a 50-year low, and a 2nd major data hack this time at Medibank. However, equities continue to swing on the hawkish rhetoric from Fed members when its quiet stocks rally but all too often someone comes out and talks extremely tough on interest rates through 2023.

US stocks surged on Friday night with the S&P500 closing up +2.4% as traders ploughed back into risk assets after bond yields turned lower and the BOJ intervened in the FX market buying Yen. Traders remain fixated on the world’s biggest bond market ahead of the Fed with any moves leading to major swings in sentiment, last night we saw the US 10-years slip back to 4.22%, still up for the week but it was enough to propel stocks higher i.e. just an end to the steep ascent by yields could deliver MM’s targeted Christmas rally. SPI Futures are calling the local market up almost 100-points on Monday morning, back towards its October high.

• We continue to believe both US & Australian equities will be higher come Christmas but volatility is unlikely to disappear in the near future.