Key Takeaways: Monetary policy typically acts on a lag. Aggressive tightening cycle starting to filter into the economy. Labor market is showing signs of weakening. Consumers are strained by high borrowing costs. Housing is paralyzed.
Key Takeaways: Credit card debt surging. Confidence falls further. Inflation expectations highest since 2011. U.S. equities lead global equity rally. Yields higher on weak auction demand. Commodities fall sharply; oil near bear market.
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Key Takeaways: S&P 500 expected to report earnings growth for first time since 3Q22. Communication services leading performance. Financials resilient, but see risks given tighter financial conditions. Energy suffering on lower year-over-year oil prices. Multinational companies being hurt by stronger U.S. Dollar.
Key Takeaways: Consumer confidence falls to a five-month low. Fed keeps interest rates unchanged. U.S. economy adds fewer jobs than expected. Major U.S. markets post best performance in roughly a year. Treasury yields plunge as Fed keeps rates steady. Gold and dollar soften on anticipation Fed is done.
In 3Q23, investors started to accept the reality of the “higher for longer” interest rate regime. The realization that central banks have not yet declared victory in the war on inflation and years of excessive borrowing by global governments fueled a surge in interest rates around the world. As a result, a modest valuation correction began in global equities as investors started to accept the “higher for longer” rhetoric that global central banks have reiterated time and time again. After the best start to a new year in the past four years (through 2Q23), the MSCI AC World Index posted its worst quarterly decline in a year, the 10-year U.S. Treasury yield rose to the highest level seen since 2007 and even Japan’s 10-year Government yield rose to a nine year high.