Year-to-date losses for stock and bond markets accelerated in the third quarter, with the MSCI World index finishing Q3 down by 6.6% in dollar terms while September followed its typical seasonal pattern as the worst month of the year in terms of equity market performance. This was mostly driven by further signs of slowing growth, and inflation readings exceeding analysts’ expectations, which has of course forced Central banks to remain hawkish for the time being.
Equity market declines were accompanied by losses on government bonds as yields rose dramatically, with Germany’s benchmark 10yr yield increasing by 89 basis points over the quarter and periphery bond spreads widening. The US 10yr yield similarly increased by 94bp over the same period. These moves have caused global government bond funds to fall by roughly 5% over the third quarter.
Notwithstanding all of the above, what happened over the course of July and early August in equity markets also gave us a taste of just how quickly investors can and will react once inflation, in particular, begins to fade. Higher inflation has implications for global growth, which is decelerating to a more sustainable level of expansion. While recession risks have risen, risks are still moderate across a suite of indicators. Europe is more vulnerable at present, but if a recession does occur in the US we would expect it to be shallow given the strength of the private sector and today’s lack of structural imbalances. With this macroeconomic backdrop, we still believe there are potential opportunities within markets.
To read the full report download here or view below:Seaspray FS Q3 2022 Update
If you would like to discuss anything raised in this update or would like a review of your financial position, please do not hesitate to contact us:
Warning: The value of your investment may go down as well as up and you may lose some or all of the money you invest. Past performance is not a reliable guide to future performance. Investments denominated in a currency other than your base currency may be affected by changes in currency exchange rates.
Seaspray Financial Services Ltd is regulated by the Central Bank of Ireland . Registered in Ireland number 582920. Copyright 2022 Seaspray Financial Services