In the third quarter, U.S. equities saw their first quarterly decline since the Q3 of 2022. The energy sector propped up market-wide performance, in large part due to elevated oil prices created by supply-constricting efforts from Saudi Arabia and Russia. Utilities, real estate, and consumer staples all posted material negative returns for the quarter.
International developed equities and emerging markets (EM) equities posted mixed returns. Continuing concerns over China’s economy, as well as idiosyncratic catalysts in Poland and Chile, negatively impacted major EM indices. Asia ex. Japan and the Eurozone also were negatively affected by concerns regarding Chinese recovery and higher rates affecting European consumers’ budgets. UK equities and Japan both posted positive returns.
Amid elevated inflation, the Federal Reserve raised the key interest rate by 25 basis points in July to a range of 5.25% - 5.50%. In September, the FOMC agreed to keep rates unchanged but kept an additional rate hike of 25 basis points (bps) on the table by the end of the year. The Fed revised their economic forecast higher given a stronger than anticipated growth outlook. This has led treasury yields to rise along the curve, particularly in the long-end of the curve.
Inflation, measured by CPI, decreased in July but increased in August and September to a year-over-year rate of 3.7%. CPI excluding food and energy, generally viewed as sticky inflation or Core CPI, fell to a year-over-year rate of 4.1% from 4.8% in June. Indicators used to measure U.S. economic activity such as the ISM Manufacturing and Non-Manufacturing indexes increased over the quarter, creating an uncertain outlook of taming inflation for the Fed.
To view the third quarter reports, click on the links below: