A Brief Look Back at Q3 2023
Global equities turned negative in Q3. Government bonds also declined in the quarter.
Let’s look at some of the reasons why.
Generally optimism declined as concerns about the global economic outlook and high interest rates resurfaced.
In the US:
- Investors entered the quarter optimistic that the US Federal Reserve had managed a soft landing and that the era of policy tightening rates would soon come to an end. That enthusiasm waned over August and September as the prospect of a sustained period of higher rates sank in.
- Inflation in the US, while ticking up in August, remained on a downward trend.
In the Eurozone shares fell in Q3 amid concerns over the negative effects of interest rate rises on economic growth. However, data released at the end of the quarter showed eurozone inflation slowed to a two-year low of 4.3% in the year to September, down from 5.2% in August. Some of the steepest declines came in the consumer discretionary spending given concerns over the knock-on effects of higher interest rates on consumers’ disposable income.
UK equities rose over the quarter. The large UK-quoted diversified energy and basic materials groups outperformed as they rebounded from weakness in the previous 3-month period. The UK also benefited from GBP weakness against a strong USD.
Emerging Markets ended the quarter in negative territory.
- Concerns that strength in the US economy will keep interest rates higher for longer had a negative effect on risk appetite.
- Chinese stocks experienced declines in August with the property sector performing badly and investors doubting that there will be adequate stimulus to put the world’s second largest economy back on track.
And locally …….
- The FTSE JSE All Share declined 3.4% in September.
- At the September SARB (South African Reserve Bank) meeting the repo rate was kept on hold at 8.5% (the prime rate remaining at 11.75%).
- The SARB cautioned that it might tighten rates further if future date supported this.
Source: Schroders