September 2023 Recap

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September 2023: A Grim Harvest for Financial Markets

September proved to be a harsh month for financial markets, echoing the falling autumn leaves with a sharp decline across major asset classes. Here’s a closer look at the key themes:

Stocks Plummet:

  • The bears feasted in September, sending major indices reeling.
  • The S&P 500 tumbled 4.8%, the Dow Jones shed 3.4%, and the Nasdaq Composite plunged 5.8%.
  • Technology stocks, once the market darling, led the downward charge, facing the brunt of higher interest rate concerns.
  • All other sectors, except energy, ended the month in the red.

Hawkish Fed Hammers Sentiment:

  • The Federal Reserve delivered another 0.25% rate hike, but its hawkish rhetoric cast a long shadow.
  • Officials hinted at continued tightening, even at the risk of economic slowdown, to combat persistent inflation.
  • This triggered fears of an “earnings recession” and further dampened investor sentiment.

Weaker Economic Data:

  • Economic data pointed towards a potential slowdown.
  • Retail sales and industrial production grew at a slower pace, while consumer confidence remained subdued.
  • These numbers fueled concerns about the impact of higher rates on economic activity and corporate profits.

Bond Yields Climb:

  • The 10-year Treasury yield soared from 4.15% to 4.58%, reflecting the market’s anticipation of more rate hikes.
  • This further pressured growth stocks and caused a flight to safety towards bonds.

Global Malaise:

  • International markets mirrored the US weakness.
  • The MSCI EAFE fell 3.4%, with European economies grappling with energy shortages and inflationary pressures.
  • Emerging markets suffered even more, with the MSCI EM dropping 2.6% amidst slowing growth in China and global risk aversion.

Other Notable Events:

  • The UK entered a recession, raising concerns about a similar path for other economies.
  • Geopolitical tensions remained elevated, with the war in Ukraine and US-China relations presenting uncertainties.
  • Supply chain disruptions continued to impact businesses and add to inflationary pressures.

Overall, September 2023 was a harsh reality check for financial markets. The optimism of earlier months dissipated under the weight of rising interest rates, slowing economic growth, and heightened geopolitical anxieties. October will be crucial in determining whether this downturn is a temporary blip or a sign of a longer-term bear market.