Lift off? Er, not really… The thoughts, words and deeds of central bankers – both actual and imaginary – remained the dominant driver of investor sentiment within financial markets for much of the year’s final quarter, although the capricious (even perverse?) nature of those investors remained evident throughout. It began with “risk-on”, as weaker than expected data meant that the first US interest rate rise since 2006 had become less likely (a good thing!), and ended with “risk-off”, as weaker than expected Chinese data pointed to a global economic slowdown (definitely a bad thing). In the interim, among other significant events, that US rate rise did actually materialise, while both the European Central Bank (ECB) and Peoples Bank of China (PBoC) cut rates and announced further stimulus. Away from the markets, meanwhile, the “Islamic State” terror campaign against the West took a disturbing turn for the worse.
The period ended with equity markets (or, more specifically, developed equity markets), having re-gained a sizeable chunk of the previous period’s losses, the majority of bond markets losing ground and commodity prices continuing their long-term decline. All of which translated to a tailwind for the US Dollar.
Equities
We in the investment business are so fond of aphorisms that, in most instances, their widespread overuse puts them so far beyond cliché to render their value questionable at best. Though this writer tries, wherever possible, to avoid using such maxims, rarely, in recent experience, has the description of markets “climbing a wall of worry” been more appropriate to characterise this latest quarter.
In a pattern that has been repeated regularly since the aftermath of 2013’s “taper tantrum”, Wall Street led global equity markets higher throughout much of October, after both employment and purchasing… (download entire report)
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