Economic environment
Global financial markets experienced increased volatility in October 2018 with a significant sell-off in equity markets following several years of strong performance leading up to September 2018. Tightening in US monetary policy, expectations of faster US wage growth and higher inflation all contributed to the equity market correction.
Global equity markets declined by up to 7% in the month of October. The size of the decline is not unusual in a historical context, especially following very strong equity market performance over recent years.
The economic environment remains supportive globally, with a large number of US companies reporting greater than expected earnings in the recent reporting season. However, the Eurozone and China have begun to show signs of slowing economic growth.
Emerging Market equities declined, particularly in less economically robust countries such as Turkey, Brazil and Argentina. The declines were partly driven by rising US interest rates, which reduced the relatively attractiveness of emerging market investments.
In Australia, the Reserve Bank of Australia kept interest rates on hold at 1.5%, and the unemployment rate decreased to 5%, a 6.5 year low.