Canadian mutual fund investors chalked up another strong month in October, at least in their equity exposures, according to data compiled by Morningstar Canada.

All eyes were on the U.S. Federal Reserve, which is expected to introduce a second round of quantitative easing on November 3. The expectation of additional stimulus drove global markets higher. As a result, all 24 of Morningstar’s equity fund indexes gained ground.

“With markets expecting roughly US$500 billion to US$1 trillion in additional bond purchases, virtually all assets felt the impact of the looming U.S. government move to boost its economy by devaluing its assets,” said Esko Mickels, fund analyst for Morningstar Canada.

A weaker U.S. dollar means higher nominal prices on most commodities, and that drove the Natural Resources Equity Fund Index to the top of the table, with a gain of 5.2%.

The Canadian Small/Mid Cap Equity, with its heavy weighting in resources, posted a gain of 4.3% and Canadian Focused Small/Mid Cap Equity index climbed 3.8%.

By comparison, the overall S&P/TSX Composite Index gained 2.7% in October.

With a somewhat weaker exposure to resources, the Canadian Equity and the Canadian Focused Equity fund indices each still managed to gain 2.3%. The Canadian Dividend & Income Equity Fund Index gained 1.6%, as its large exposure to the financial sector dragged on returns.

The falling U.S. dollar sparked further battles in the so-called currency war, with other countries devaluing their currency in an effort to shore up exports.

The European Equity index and the U.S. Equity index gained of 3.5% and 3.4%, respectively. The International Equity index was up 2.8%, while Global Equity gained 2.4% and the Asia/Pacific ex-Japan Equity index picked up 2.2%.

While the main Japanese stock index failed to join the global rally—the Nikkei 225 fell 1.8%—Canadian investors benefited from a rising yen, and the Japanese Equity Fund Index gained 0.8%.

(11/02/10)

Originally published on Advisor.ca