October brought a stock market slaughter that you rarely see on this scale. October is over, but before going over to November’s agenda, one should once again face the facts with the bluntness of last month.

Wall Street Stock Market

It was a course disaster on all routes. Approximately $5 trillion (€4.4 trillion, or €4,400 trillion) of market capitalization was destroyed within 31 days, according to calculations by S&P Dow Jones Indices. It is a joint venture of S&P Global Media Holding, CME Group’s largest options exchange in Chicago and the media empire of Rupert Murdoch News Corporation.

The calculation was based on the global index MSCI All-Country World. It has fallen by more than eight percent within a month – the worst result since May 2012. If one expects since the high of January of this year, the MSCI World, which maps 23 countries, has lost 15 percent in capitalization.

The month was raven black for everyone. The US leading index S&P 500 plummeted by almost seven percent. In various Asian countries, including Japan, it was almost ten percent or more, as in the Nasdaq. Significantly less, but also almost six percent, in the European benchmark index Stoxx Europe 600. In the German stock market barometer DAX, the loss amounted to over seven percent, the Austrian ATX to six percent.

The main reason that the European stock exchanges managed to get off relatively lightly in October is that the year before had been very negative over nine months, while stock markets in the US were still hurrying from one high to the next.

As the Wall Street Journal reports from these calculations, even a classically diversified portfolio (60 percent equities and 40 percent bonds) has not protected it from losses – it was down by 3.5 percent in October and 1.5 percent since the beginning of the year.

And even with an ultra-conservative investment portfolio (75 percent bonds, the remaining 25 percent in equities) would have landed in October with over two percent in the dark. The same has been observed very rarely – and only in very volatile phases such as in 1990 or the years 2001 and 2002.

Sources: Die Presse