The ghost of the infamous “taper tantrum” of 2013 haunted markets in October as rates increased across much of the developed world. Sovereign yields moved higher globally in a marked departure from the declining trend prevalent for much of the year. Firming inflation data along with concerns about the longevity of central bank support pressured rates higher.
The global economy continued to muddle along as inflation pressures built. Preliminary GDP growth estimates for the U.S. showed a revival from softer growth in the first half of the year, though some underlying trends tempered optimism. Still, solid growth and employment figures coupled with firming inflation data helped inflation expectations move higher.
Higher interest rates, a stronger dollar and heightened election uncertainty combined to spook markets. Rates rose and the dollar strengthened, while risk assets broadly were mixed as indications of a tighter U.S. presidential race weighed on risk sentiment toward the end of the month.