Quarter in Review Q3 2023
- Quarter in review
- 10.10.23
Key themes
- The global macro backdrop in the third quarter continued to suggest that inflation remains sticky, while activity data was somewhat mixed. The divergence between a resilient US economy and signs of slowing in the eurozone persisted.
- Central banks continued to hike interest rates and emphasised that policy would need to remain restrictive for longer in order to tame inflation.
- The prospect of tighter financial conditions – ‘higher for longer’ rates – weighed on global asset markets.
Markets snapshot
- Global equities, as represented by the MSCI All Country World Index (ACWI) declined by 2.4% (-0.4% in euro terms) as equity markets priced in persistently high interest rates amid potentially slower growth and tighter credit conditions.
- Emerging market equities were down by 1.3% in Q3, outperforming developed markets (-2.5% in local currency). The asset class was supported by rallies in certain markets like India (+2.7%) and Brazil (+0.1%).
- Government bond yields were pushed higher in Q3 against a backdrop of sticky inflation and hawkish central banks. The ICE BofA 5+ Year Euro Government bond index fell by 4.4%. As markets priced in higher-for-longer rates, yields rose and so government bond prices fell.
- European investment-grade corporate bonds rose by 0.3% in Q3, supported by carry from high interest rates. Global high yield bonds rose by 0.7%.