4 October 2021

The nights draw in

Is the October effect just a superstition or does it carry any merit? Brian Tora provides his insight on what we can expect over the coming weeks.


October can be a tricky month. Black Monday, when the stock market fell by a quarter in a single day, was in October 1987. And the Wall Street crash of 1929 that started the Great Depression was an October event. Perhaps it is that autumn is beginning to exert its grip, with cooler days and longer nights, that makes one feel a little less confident at this time of year.

Certainly, life is not getting any easier for investors as we enter October. Concerns over global energy costs and a slowing of growth in China, which has been the powerhouse behind economic expansion worldwide, plus inflation fears, of course, have served as the macro drivers of uncertainty. Back home, queues at petrol stations hardly add to any feel-good factor that should be emerging as vaccination numbers continue to climb.

Despite governments aspiring to be “Green”, the fact remains that fossil fuels – most notably oil and gas – continue to play a crucial role in our economic development. The spike in the gas price, which has resulted in the collapse of a number of smaller energy suppliers, has underscored our dependence on these sources of power. With oil also trending higher (Brent crude topped $80 a barrel as I write this), there should be little wonder that investors are unsettled.

We should expect more developments as companies endeavour to position themselves for a future which may be less friendly to traditional means of power generation. In my part of the world, the rebuilding of Sizewell continues to stimulate discussion, while offshore wind farms remain a significant part of the landscape. The decision of the investment company co-founded by US vice-President Al Gore, a noted environmentalist, to take a significant stake in Octopus Energy is, perhaps, a sign of things to come.

Meanwhile, we enter the final quarter of 2021 with house prices continuing to rise, inflation gathering steam and households facing further pressures as measures aimed at helping people through the effects of the pandemic are phased out. The future is seldom clear, but at least we seem to be weathering the pandemic, even if all the evidence is now pointing to a slowdown in the economic recovery engendered by the lifting of Covid restrictions. As the nights draw in we need to keep an eye out for the unexpected.

 

Brian Tora, Associate

Bespoke Discretionary Portfolio Management

Discretionary Portfolio Management

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