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Stock market records first loss since February 2009

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After a remarkable period of substantial gains, the stock market finally registered its first loss since February 2009 in October, falling by 1.86 per cent.

The report by Edhec Business School says that with implied volatility back on the rise in a significant way (30.69 per cent), the S&P 500 index signalled the end of a spectacular recovery that generated an unprecedented 45.76 per cent return over the past seven months.

Similarly, after a remarkable 39.48 per cent return between February and September, convertible bonds were bound to follow and registered their first loss (0.76 per cent) in eight months, whereas regular bonds managed yet another limited but positive return (0.31 per cent).

The credit spread rose again (0.97 per cent) although at a slower pace. On the other hand, after a return to profitability in September, the commodities market skyrocketed (7.36 per cent) and reached its highest level since last year’s crisis.

The dollar remained weak and fell slightly again by 0.30 per cent.

The convertible arbitrage strategy did not seem to be affected by the poor performance of risky bonds, and managed yet another month of profitability (1.26 per cent). Over the past 11 months, the strategy has recorded a remarkable performance of 45.20 per cent.

The CTA global strategy was not able to confirm its two previous gains and fell 1.39 per cent.

Affected by the fall off on the stock market, the long/short equity strategy also recorded its first loss (0.94 per cent) since February, although it was only about half of the S&P’s.

The equity market neutral strategy failed to produce a positive return and dropped off slightly by 0.12 per cent.

Conversely, the event driven strategy resisted and remained positive, up 0.33 per cent, for an eighth consecutive month. The fixed income strategy registered a tenth month of profitability (1.94 per cent) and neared its highest level of October 1997.

Overall, the fund of funds strategy was not able to record a positive return, falling 0.05 per cent, but clearly outperformed the stock market which was down 1.86 per cent.

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