OCM Commentaries

Market Commentary 27th October 2021

By October 28, 2021 No Comments

After starting the week in negative territory, the OBI portfolios pushed higher as corporate earnings became a focal point for investors. It is positive to see all six of the main OBI portfolios above their annualised rate of return targets yet again, albeit we maintain our cautious outlook in the short term.


Financial markets across the globe posted positive returns throughout the week, despite the recent slowdown in economic optimism. We have maintained our defensive short-term position as we expect elevated financial market volatility to continue, with the euphoria around the economic recovery coming off its highs from earlier in the year. As explained last week, it is unlikely that financial markets will begin to go up irrespective of news flows again. This means new opportunities will need to be carefully selected with consideration for today’s macroeconomic environment, alongside the positive macroeconomic environment that could unfold throughout 2022 and beyond. We aim to navigate today’s volatile market conditions and, when economic risks ease, we will likely move the OBI portfolios closer to their maximum equity weightings to benefit from the return of optimistic energy within financial markets.


In the table below, US-based equities had another strong week of performance, moving to new all-time highs. The bounce-back in US equities has been spurred on by a positive start to the latest earnings season where, out of those firms that have announced their results, 84% of US firms have announced positive EPS surprises. Financial market sentiment was also supported by hopes for additional fiscal stimulus, although concern over inflationary pressures and mixed economic data flows still linger.


European equity prices also rose, with small, medium, and large-cap firms becoming increasingly attractive. Reasonable valuations, the concentration of cyclical exposure, and the number of ESG-oriented opportunities have drawn interest to the region over the week, although mixed earnings announcements brought regional equities off of their high experienced earlier in the week.


UK medium and large cap stocks moved higher over the week, as gains in telecommunications, construction, and industrial transportation sectors supported firm fundamentals. In addition, the financial services and commodities sectors have continued to perform strongly in recent weeks. Supply constraints remain a key concern for investors, a risk particularly pronounced for the UK’s existing Brexit disruptions. This may be a theme that continues throughout the winter months and could be worth monitoring to understand the extent of continued supply chain disruption.


Chinese equities also gained over the week, despite ongoing Evergrande concerns and alarming news flows regarding hypersonic missile tests. Investors have been hoping that the peak of regulatory threats from the Chinese government has passed, and some investors are seeing this as an opportunity to add long term Chinese exposure at discounted prices. While Japanese equities fell this week ahead of the region’s general election on 31st October, the long-term outlook for the region remains favourable if Prime Minister Kishida can sustain fiscal stimulus beyond 2021.


Within the non-equity sectors monitored, corporate bonds, gilts, and index-linked gilt performance extended upon last week’s gains, while high yield and strategic bonds remained flat over the week.


Against this backdrop, the OBI portfolios all moved higher. OBI 3 to 5 experienced the greatest uplift owing to strong multi asset performance over the week (these funds tend to contain slightly higher US exposure), while OBI 6 to 8 edged up on the back of the rise in risk asset prices, with European assets performing particularly strongly over the week.



Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value.  You may not get back all of your investment and the final value of your investment will depend on the performance of your portfolio.  The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations.  Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges and trading spreads.  Unless stated, income is reinvested into the portfolio.  The information contained in in this document is for information purposes only.  It does not constitute advice or a recommendation or an offer or solicitation for investment.


Key Events We Are Watching This Week:

  • Thursday 28th: EU Consumer Confidence
  • Thursday 4th: Bank of England Interest Rate Decision


This Day in History

On this day in 1891, D.B. Downing was awarded a patent for the letter box.


Thank you for reading, have a great week!

Jason, Gina & Ben