
Monthly Market Roundup cov. September 2022
In the monthly market roundup for September, we look at what was yet another challenging month for global stock markets. Find out more.
September was another tough month for equity markets around the world, following on from August’s woes. Emerging markets joined the club in losing ground, underperforming developed markets for the first time in months. Major central bank moves in the face of ever-persistent inflation continue to cause turmoil, as a global risk-off sentiment sets in.
European markets ended the month down with inflation the main driver. It hit a new high of 10%, which was more than expected. Wholesale energy prices, and the rising cost of food, alcohol and tobacco all contributed.
The European Central Bank raised interest rates to the highest level since 2011 in response. Elsewhere, in politics, Italy looks set to elect it’s first ever female prime minister. This is a move that will see a shift to the centre-right for the country.
UK shares fell last month as Liz Truss’ incoming government announced policy changes aimed at boosting the country’s economy. They included support for households and businesses in the wake of rising energy costs, as well as several tax cuts.
Sterling hit a record low against the dollar last month, close to parity as investor concern grew over the fiscal policy announcements.
The Bank of England raised interest rates by a further 0.5% to the highest level since 2008. In better news, it emerged that inflation dropped slightly for the first time in almost a year from July to August, beating inflation forecasts.
Continued macroeconomic headwinds meant that US markets also ended the month down. This came after an initially positive start, ahead of the release of key inflation data. But, although it was lower than last month, inflation is still higher than forecasted.
The Federal Reserve remained unmoved on it’s hawkish[1] stance, delivering the expected 0.75% interest rate rise. Reflecting the sentiment of other major central banks, this dragged on growth expectations and refreshed recession concerns.
There was a slight rally close to month-end as investors looked to take advantage of price weakness caused by the dampened outlook. But this wasn’t enough to spark a full recovery.
A general global risk-off sentiment negatively impacted Asian markets in September. Chinese equities ended down, depsite inflation being lower than expected.
It continues to be a difficult environment for technology stocks. This impacted both Korean and Taiwanese markets, with the currency of the former falling to it’s lowest level in 13 years.
Having posted a run of strong performances, Indian equities faltered. Low rainfall in food-producing regions put pressure on food prices and consumer price inflation (CPI). In the Pacific region, both Japan and Australia endured difficult months.
Emerging markets also fell in September, ending a run of outperformance. They actually underperformed the developed world as broad macroeconomic volatilty and currency weakness took a toll.
Not unusually, Latin America showed most steel, followed by Europe, Middle East, Africa (EMEA) with Asia lagging. South Korea, Taiwan and the Phillipines performed best, with Mexico, Indonesia and Peru posting strongest.
The CE3 (three central european countries - Czech, Poland and Hungary) lagged most in EMEA, given their vulnerability to the Russian-Ukraine conflict. Elsewhere, though outperforming the rest of EM, recession fears negatively impacted Latin American gains.
Fixed income markets continue to suffer in another challenging month, especially in the UK with the arrival of a new government with new policy.
The chancellor’s not-so-mini budget not only impacted government bond yields, but also soured investor sentiment to UK assets. Several unfunded tax cuts raised fears that the likes of pension funds could be bankrupted.
In response, the Bank of England pledged to buy billions in long-dated government bonds, protecting UK credit and households. Corporate bonds, particularly sterling credit also had a tough time, posting negative returns.
While renewed Russian threat in Ukraine sparked further fears over the energy crisis last month, the EU is also heading into a period of critical negotiations.
They centre around the so-called ‘Fitfor55’ package, named after the EU’s pledge to reduce greenhouse gas emissions. The package touches on almost all areas of the economy and could transform the economy as we know it.
Negotitiations have been going on for some time. But they’re to reach their denoument this autumn, as the European parliament and member states attempt to iron out their differences in what has become known as ‘the triologues’.
Monthly Market Roundup cov. September 2022
In the monthly market roundup for September, we look at what was yet another challenging month for global stock markets. Find out more.
1A hawkish stance is one that believes in increased interest rates as a control measure for inflation.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Data as of 30 September 2022 unless stated otherwise.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
Past performance is not a guide to future returns.
This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.