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All Equity Fund Categories Positive In October As Markets Shrug Off U.S. Concerns, Morningstar Canada Data Show

TORONTO, Nov. 4, 2013 /CNW/ - Mutual funds in Canada that invest in equities posted strong results in October, as stock markets around the world showed surprising resilience to negative headlines and risks involving the political debacle in the United States. All 22 of the Morningstar Canada Fund Indices that track equity categories posted increases for the month, including 15 categories that were up by more than 4%, according to preliminary performance numbers released today by Morningstar Research Inc. ( Morningstar Canada), a subsidiary of independent investment research provider Morningstar, Inc.

"The reaction of world markets to the events in the United States was muted, as investors didn't appear to expect a prolonged government shutdown and discarded the possibility of the U.S. defaulting on its debt. For the first half of the month, even while the U.S. government was shut down, most equity fund categories had positive returns," Morningstar fund analyst Achilleas Taxildaris said.

"Another implication from the shutdown was the delay of economic data releases, making it harder to assess the condition of the U.S. economy. This, combined with the appointment of new Federal Reserve Chairman Janet Yellen, who is considered a supporter of the accommodative monetary policy, pushed the possibility of tapering to early 2014. That action helped both the equity and bond markets to downplay the risk of a U.S. default, despite the lack of signs of an agreement about raising the debt ceiling at the time," Taxildaris said.

When an agreement was eventually reached, it was followed by new record highs for major indexes in the United States and further increases in markets around the world. "While economists were not impressed when economic data were finally released, markets chose to focus instead on the positive earnings results of major U.S. firms such as GE and Google, leading indices even higher by month-end," Taxildaris said. The S&P 500 Index (in U.S. dollars) ended the month with a 4.6% increase, which was bested by the Morningstar U.S. Equity Fund Index's 5% rise as Canadian mutual funds in that category were helped by favourable currency effects.

Despite the impressive results by U.S. equity funds, four other categories did better in October. The best-performing fund indices were Emerging Markets Equity and Financial Services Equity with increases of 5.6% each, followed by European Equity and Asia Pacific ex-Japan Equity with 5.2% each. Meanwhile, funds in the Global Equity category collectively rose 4.6% while International Equity funds were up 4.2%.

Domestic equity funds also had a very strong month, with the Canadian Equity and Canadian Dividend & Income Equity fund indices both posting increases of 4.6%, and the Canadian Small/Mid Cap Equity fund index increasing by 4.4%. The Morningstar Canada Fund Indices that track the Canadian Focused Equity and Canadian Focused Small/Mid Cap Equity increased by 4.1% and 3.6%, respectively.

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