Sabco® Investment's Monthly Market Report - September, 2023

Sabco® Investment's Monthly Market Report - September, 2023

Q3 saw a decline in US equities. Initial optimism over the Federal Reserve's potential soft economic landing and easing policy rates faded by September, given the likelihood of prolonged higher rates. While the US job market stands strong, unemployment rose slightly in August. PMI for September dropped slightly, indicating a cooling US economy. Though inflation rose in August, its trajectory remains downward. Fed projections hint at another rate hike this year and a potential rise in 2024. Energy stocks remained steadfast, but most tech giants including Apple, Microsoft, and Amazon faced declines, dragging the overall market.

Eurozone stocks took a hit in Q3, primarily due to concerns about interest rate hikes affecting economic growth. However, recent data shows a decrease in Eurozone inflation. Higher interest rates and its impact on disposable income worried investors, leading to declines, especially in consumer discretionary and IT sectors. However, the energy sector showcased growth amid rising oil prices.

UK stocks experienced growth in Q3. Major UK energy and basic material groups outshone, rebounding from Q2's downturn and benefiting from sterling's weakness against a robust dollar. With signs of UK consumer confidence on the rise and potential peak in base interest rates, domestically focused sectors, including housing and travel, showed recovery.

The Japanese stock market faced a downturn mainly in large growth stocks during Q3, affected by rising interest rates. However, value stocks showed promise. The TOPIX Total Return index displayed a slight positive growth of 2.5%. Positive quarterly earnings and a weakening yen, coupled with strong domestic demand, influenced the market trends.

Q3 for Asia ex-Japan was marked by a decline, majorly due to concerns about China's economy and global growth. Chinese stocks took significant hits in August, while Hong Kong shares suffered due to issues surrounding Chinese property company Evergrande. Countries like South Korea also saw stock price drops.

The quarter started strong for emerging markets but ended on a low, impacted by a strong US economy and rising interest rates. Concerns over the Chinese economy and property sector further weakened the market.

Q3 was characterized by the resilience of the US economy, with robust labor markets and improving manufacturing. US debt concerns, however, pressured the Treasury market. A surge in oil prices was offset by better news in inflation, enabling major central banks to pause further rate hikes.

The S&P GSCI index showcased a growth in Q3, primarily driven by increased energy prices after significant production cuts by Russia and Saudi Arabia.

Bitcoin and Ethereum saw a decline in Q3, although Bitcoin remains one of 2023's top-performing assets. US regulations played a significant role in dictating price movements. Ethereum's shift to a 'Proof of Stake' mechanism marked its first anniversary in September, enhancing its environmental footprint and operating as anticipated.