Since our previous update in September, global markets continue to be influenced by a range of forces. As always, these are shorter term movements and are accounted for within your financial plans.
It has been a particularly busy month in the markets, with a mix of both positive and more challenging news. In the UK, we saw reported inflation figures falling, alongside the Bank of England’s decision to hold the base rate, despite market beliefs we would see a further increase. However, September was the weakest month of the year for global equities as multiple headwinds dampened market sentiment, these included:
- Renewed inflation fears on the back of rising oil prices.
- Relatively hawkish central banks reiterating their “higher for longer” rates stances or what is now being termed “the tabletop”.
- Sharply higher bond yields, particularly in regions that had reiterated the “higher for longer” stance.
- Continued stresses in China property sector
This risk-off sentiment was seen across most asset classes outside of equities and higher bond yields for Fixed Income. Commodities in aggregate closed the month down 1%, as measured by the Bloomberg Commodity Index. But underneath the overall level there was a significant divergence. Brent oil closed the month up 9.7% at $95 a barrel its highest level since November on the back of Saudi production cuts, Russian export bans and higher mobility fuel demand. On the flip side, metals continued to decline as economic growth concerns strengthen.
In regional equity markets, the UK was the bright spot up 1.8%, supported by the energy sector on the back of higher oil prices and the weaker pound which fell through the month. Europe ex UK was the worst performing regional market, -1.3%, as fears of stagflation (slow economic growth and high unemployment, with persistent high inflation) in the region grow. Purchasing Managers data showed that both manufacturing and services are now contracting; whilst inflation, despite falling to 4.5% (CPI), remains above the ECB rates at 4%.
Meanwhile the US dollar strengthened during the month again, rising 3.9%, but still down 8.4% from a year ago. Beyond the headwinds of inflation, interest rate expectations and Chinese sentiment, the US markets were also hit by the continued threat of a government shutdown (with a temporary solution found in the last minutes) and by strikes. The United Auto Workers (UAW) called strikes across 38 distribution centres in the US. This could see a potential increase in used and new car prices both of which make up a meaningful component of the CPI 7% in the headline rate and 8.78% in Core CPI.
If you have any questions at all about your investments, or would like to further discuss your financial plan, please do not hesitate to contact your financial adviser.
— Aled Phillips
Chartered Financial Planner & Commercial Director
Call: 01633 851805
Email: [email protected]
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The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.
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