Mutual funds in Canada that invest in equities posted strong results in October, as stock markets around the world showed surprising resilience to negative headlines and risks involving the political debacle in the United States.
All 22 of the Morningstar Canada Fund Indices that track equity categories posted increases for the month, including 15 categories that were up by more than 4%, according to preliminary performance numbers released Monday by Morningstar Research Inc., a subsidiary of independent investment research provider Morningstar, Inc.
“The reaction of world markets to the events in the United States was muted, as investors didn’t appear to expect a prolonged government shutdown and discarded the possibility of the U.S. defaulting on its debt. For the first half of the month, even while the U.S. government was shut down, most equity fund categories had positive returns,” Morningstar fund analyst Achilleas Taxildaris said.
When an agreement was eventually reached, it was followed by new record highs for major indexes in the United States and further increases in markets around the world.
The S&P 500 Index (in U.S. dollars) ended the month with a 4.6% increase, which was bested by the Morningstar U.S. equity fund index’s 5% rise as Canadian mutual funds in that category were helped by favourable currency effects.
Despite the impressive results by U.S. equity funds, four other categories did better in October. The best-performing fund indices were emerging markets equity and financial services equity with increases of 5.6% each, followed by European equity and Asia Pacific ex-Japan equity with 5.2% each. Meanwhile, funds in the global equity category collectively rose 4.6% while international equity funds were up 4.2%.
Domestic equity funds also had a very strong month, with the Canadian equity and Canadian dividend & income equity fund indices both posting increases of 4.6%, and the Canadian small/mid cap equity fund index increasing by 4.4%. The fund indices that track the Canadian focused equity and Canadian focused small/mid cap equity increased by 4.1% and 3.6%, respectively.
For the seventh time in the past 12 months, the worst-performing equity fund index in October was precious metals equity, though this month it managed to eke out a positive 0.2%. Funds in that category have collectively lost more than 47% during the past year.
Final performance figures will be published on next week.