Q3 – July to September 2023
What’s been happening in the markets?
At the start of the quarter, there was a sense of optimism in markets. However, this optimism was vulnerable to a setback, as expectations for the economy avoiding a recession and for an end to interest rate rises were already factored in to market prices.
That enthusiasm quickly disappeared and stock markets fell after concerns surfaced about the US economy’s growing debt burden as well as the US Federal Reserve’s (Fed) upward revision to their interest rate forecasts.
Emerging market shares continued to struggle as tighter financial conditions (e.g. higher interest rates) had a negative impact on emerging market currencies and made investors more risk-averse.
This was combined with ongoing weakness in the Chinese economy and concerns about the country’s property sector.
The prospect of higher rates for longer also led to a major sell-off in US government bonds which put downward pressure on bond prices.
UK gilts, however, performed well as signs of slowing inflation, labour market weakness, and deteriorating growth activity allowed the Bank of England to keep interest rates unchanged in September. The European Central Bank (ECB) also hinted that it had finished raising interest rates.
Commodities rose sharply in the third quarter, driven by significantly higher energy prices after a summer heatwave unfolded as well as cuts to oil production by Russia and Saudi Arabia.
When it comes to investing, we believe that the best way to achieve your long-term investment goals is to have a diversified portfolio. This is why we suggest staying invested in our Ready-made funds for the long term. They all invest in a mix of shares, bonds, and cash, giving you a diversified strategy, which can help protect you against unanticipated falls in markets.
Of course, no matter what approach you take with your investments, their value can fall as well as rise and you might not get back what you invest.