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Quarterly Review
What does the chart show?
This chart shows the relative performance of a variety of major asset classes from the end of June to the end of September. Global equities, as captured by the MSCI World Index, started the quarter in the midst of a rally, but the gains were erased later in the quarter with equities returning -7.1% in USD terms. Global Bonds also rallied early in the quarter but also saw their gains subside. High yield credit and US Treasuries were the two strongest performers with returns of -2.7% and -5% respectively. Commodities continued to decline from their earlier peaks. Oil fell to just over $85 per barrel at the end of September, a decline of -25% from its early June highs with a -16.7% decline throughout the quarter. Gold also declined throughout the quarter with a return of -8.4%.
Why is this important?
Despite having rallied until the first half of August, major asset classes suffered throughout the third quarter. The initial rally, which was driven by hopes that weakening economic data might force a pivot in strategy from the Federal Reserve and other Central Banks, saw global equities rise as much as 10%. However, persisting inflation saw increasingly hawkish moves by central banks with the Fed leading the way. This quickly put an end to hopes for a more dovish pivot in the short term. Monetary tightening combined with high levels of inflation have damaged the confidence of consumers and businesses. These headwinds have contributed further to a slowdown in economic activity and fears of a recession. This has helped push commodity prices from their peaks, although they remain high. Supply chain pressures are also showing signs of easing, raising hopes for a return to more natural price levels. Significant uncertainty surrounding the depth and duration of the now expected recession, as well as developments in the war in Ukraine, means that fear is extremely prevalent in markets. Although short-term timing risks remain, the substantial corrections in markets mean that longer-term opportunities are now beginning to emerge.
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By Mondial DubaiWhat does the chart show?
This chart shows the relative performance of a variety of major asset classes from the end of June to the end of September. Global equities, as captured by the MSCI World Index, started the quarter in the midst of a rally, but the gains were erased later in the quarter with equities returning -7.1% in USD terms. Global Bonds also rallied early in the quarter but also saw their gains subside. High yield credit and US Treasuries were the two strongest performers with returns of -2.7% and -5% respectively. Commodities continued to decline from their earlier peaks. Oil fell to just over $85 per barrel at the end of September, a decline of -25% from its early June highs with a -16.7% decline throughout the quarter. Gold also declined throughout the quarter with a return of -8.4%.
Why is this important?
Despite having rallied until the first half of August, major asset classes suffered throughout the third quarter. The initial rally, which was driven by hopes that weakening economic data might force a pivot in strategy from the Federal Reserve and other Central Banks, saw global equities rise as much as 10%. However, persisting inflation saw increasingly hawkish moves by central banks with the Fed leading the way. This quickly put an end to hopes for a more dovish pivot in the short term. Monetary tightening combined with high levels of inflation have damaged the confidence of consumers and businesses. These headwinds have contributed further to a slowdown in economic activity and fears of a recession. This has helped push commodity prices from their peaks, although they remain high. Supply chain pressures are also showing signs of easing, raising hopes for a return to more natural price levels. Significant uncertainty surrounding the depth and duration of the now expected recession, as well as developments in the war in Ukraine, means that fear is extremely prevalent in markets. Although short-term timing risks remain, the substantial corrections in markets mean that longer-term opportunities are now beginning to emerge.