Investment

September General Markets Comments

by Pierre Mouton

September General Markets Comments

“Why did you do it” – Stretch, 1975.

Most markets participants must have had these words in mind after Fed’s Jerome Powell sounded way more hawkish in September than what the majority was expecting. “Why did you do it”, Jerome? It seems that whatever the pain inflicted, the Fed wants inflation to tame further; there are clear tensions in Energy prices, but we all know that this is volatile and can revert quickly, so perhaps it is more on the wage front that reasons have to be found: a wave of pay increases is currently happening in the US, which certainly worries the Central Bank when it comes to the inflation transmission mechanism. In any case, the result is eye-popping with the US 10 year yield up 46 bps in September (up 70 bps year to date), dragging along almost all fixed-income markets on the downside.

This type of negative and abrupt move in bonds triggers well-known consequences: equities tumble, Value outperforms Growth, Gold falls and the dollar rises. But it can’t be said that investors scurried to buttress their defensive or value equities in September, as the equity sell-off was quite widespread.

The MSCI World abandoned 4.5% last month, the S&P 500 4.9%, the Stoxx 600 1.7%, the MSCI Emerging Markets 2.8% and the Japanese Topix only lost 0.4% (but the Yen receded by 2.7%, and is down 14% year to date versus the dollar). Value did better than Growth (-3% versus -5.7%), the dollar rose 2.5% versus the euro, and Gold fell 4.7%. Oil recorded a spectacular 8.6% rise for the WTI, buoyed by steady demand and OPEC’s determination to maintain limited supply.

 

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS PARTNERS SA provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data or other financial instruments referred to in this general comment. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

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