October turned out to be a kind month to share investors, in the end. The Standard and Poor's 500 was up 2.3% for the month, well above the average October return since 1960 of 1%.
However, Craigs Investment Partners broker Chris Timms said while the returns looked good, October was a ''very volatile'' month.
There were 1% or larger movements on 12 of the 23 trading days in October.
In the 194 trading days during 2014 leading up to October, there were only 21 days with moves of that magnitude - just 11% of the time.
''Some investors will have found the October volatility difficult to cope with, which could mean they have a more conservative risk profile than their current portfolio positioning suggests.
"We expect more periods like this and, given markets have rebounded in recent days, cautious investors should use this strength to reduce risk in portfolios.''
That could mean taking profits in equities and rebalancing towards fixed interest and cash - as difficult as that was at present - or reducing higher-risk positions and rebalancing into defensive sectors, he said.
BNZ senior economist Craig Ebert said the three points he took from October were:
• Equity markets collapsing and currently recovering in October, with global growth worries widely blamed.
• The US Federal Reserve ending quantitative easing, sounding upbeat on the US economy and the Bank of Japan surprising with further asset purchases.
• New Zealand third-quarter inflation was subdued and the Reserve Bank dropped its formal tightening bias as a result.
The early part of the month drew comparisons with 1987 and 2008.
At one point the S&P 500 was 7.7% weaker for the month, erasing all of the 2014 gains and breaking below the 200-day moving average for the first time since late 2012.
The VIX volatility index stormed to above 30%, suggesting fear levels among investors were at their highest since the European debt crisis in 2011, he said.
''In the most eye-watering move of all, US 10-year Treasury bond yields collapsed in half a day before recovering nearly all of the losses before the close.
''The near-apocalyptic moves were only stymied after policymakers turned out in force.''
The catalyst for the collapse was concerns about global growth, Mr Ebert said.
First, the International Monetary Fund trimmed its forecasts for world economic growth.
Around the same time, Germany factory orders and industrial production posted miserable September figures which played along with the IMF's assessment there was a 35% chance the euro zone would soon return to recession.
Lastly, the Fed's September minutes exuded a cautious tone, with financial media highlighting comments around the risk a stronger US dollar posed to US exports, as well as a heightened sense a global slow-down could present challenges for US growth, he said.
''We consider the plunge in risk appetite rather overdone if it was truly to be laid at the feet of global growth concerns.
"But we suspect a significant driver of the violent price action was investor positioning.''
Through the third quarter, investors jumped on the US dollar bandwagon in droves, as shown by the surge in speculative US dollar long positions placed, taking it to the second-highest level in the history of the series, he said.
October's shakedown could be characterised as a brief, albeit sharp, corrective phase where weaker players capitulated on recently established positions.
Some semblance of order was re-established heading into the end of the month with the Fed's October policy statement vindicating the still-positive view investors held on the US dollar, Mr Ebert said.
Mr Timms said this month, (November) Craigs was making a change to its geographic equity weightings and increasing its allocation to global equities by 2%, from 20% to 22%, at the expense of Australia which was reduced 2% to 18%.
Australian equities had performed well in 2014, with the market up 6.8% and a 2.7% fall in the New Zealand dollar relative to the Australian currency helping.
''But from here, we see better value and more opportunities further afield. This is particularly so given our expectation of further incremental weakness in the New Zealand dollar - a view we hold with high conviction.''
