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September market performance: The start of a storm?

Market Rewind
Charu Chanana 400x400
Charu Chanana

Market Strategist

Summary:  A risk-off mood engulfed markets in September as central banks pressed on with the higher-for-longer narrative and the surge in oil prices further complicated the macro outlook. Both equities and bonds declined in tandem. Energy was the only sector to close in gains for the month, while all other defensive sectors failed to provide shelter. US equities also underperformed Europe and Asia.

Global equities saw their worst month so far this year in September, recording a decline of 4.4%. A triple-whammy of risks underpinned, including rising bond yields, surging oil prices and increasing concerns about the global economic growth outlook. China momentum failed to show a material pickup, while more clouds have gathered over the Eurozone outlook. Meanwhile, geopolitical tensions continued, and the AI-fueled tech rally deflated further, taking out further steam from the equity markets.
Web 1200x500 Global equity performance 20231002

US -4.9%
While the Fed paused its tightening cycle in September, the message remained that of higher-for-longer, which has been painful for the US equity markets to digest. As a result, the US equity benchmark index, the S&P 500, was down 4.9% in September and underperformed other global equity benchmarks. The OPEC-driven surge in oil prices also underpinned concerns of another spike in inflation as well as a pullback in consumer spending, as purchasing power gets impeded. Meanwhile, markets were looking ahead to risks coming from an impending US government shutdown, which has been averted for now, along with autoworker strikes, as well as the restart of student loan repayments. 

Europe -1.6%
The European index, MSCI Europe, outperformed the US benchmark index in September, but it was also in the red, as it closed down 1.6%. Inflation has started to ease, and the ECB hiked rates again in September but hinted at peak rates, while the Bank of England and Swiss National Bank kept interest rates unchanged in a surprise decision. While most central banks could stay tight with risks of an oil-driven inflation resurgence, Europe’s economic concerns continue to get louder with the slump in Germany and risks seen to Italy’s fiscal situation as well. Meanwhile, demand from Chinese consumers remains tepid. 

Asia -2.9%, Emerging Markets -2.8%
The performance of Asia and emerging markets improved in September, after hefty declines in August. Still, MSCI Asia was down 2.9% and MSCI Emerging Markets slumped by 2.8% in the month. The weakening global growth outlook continued to put pressure on Asia’s export-driven economies, such as South Korea and Taiwan, even as the domestic-demand-driven economies such as India closed the month in green. China’s high frequency data started to show some signs of an improvement, but the property sector remained an overhang. Meanwhile, the rise in oil prices and a sustained surge in the US dollar added to the headwinds for EMs.

Web 1200x500 Regional performance 20231002

The energy sector recorded a fourth consecutive month of gains in September and was the only sector in green, with gains of 2.5% last month. Crude oil prices have extended their advance amid supply tightness concerns, and $100 oil in the short-term remains a key focus. This has brought the focus back to energy equities which continue to generate high shareholder returns. Financials was the second-best performing sector, posting a decline of 2.3%, while Communication Services and Healthcare were down over 3%. 

Web 1200x1200 Sector performance 20231002

Despite the recent sell-off in bonds on the back of higher-for-longer messages from most global central banks, bonds outperformed equities yet again in September. Central banks are still generally maintaining a hawkish bias, and we saw bear steepening of the yield curve in most developed markets. Corporate bonds underperformed global Treasuries once again in September.

Web 1200x500 Global bond performance 20231002
Check out the rest of this month’s performance figures here:
A4 Monthly market performance 202310022x


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