SUMMARY
- Global equity markets continued to weaken in October as economic activity slowed and investors increasingly recognised that central banks will keep interest rates ‘higher for longer’.
- Smaller companies again underperformed large-cap stocks during the month.
- Elevated interest rates and a slowing economy have brought a period of unusually severe underperformance for global small-cap stocks. The market is now trading at historically cheap earnings multiples relative to larger equities.
- This typically only endures for fairly short periods of time, generally while the global economy faces particular challenges. Smaller companies generally grow their earnings faster and at higher rates of return, which historically support valuation levels at premium earnings’ multiples.
- The Fund returned -5.1% in October, while the benchmark returned -3.7%.