The third quarter of 2023 proved to be a period of mixed performance and fluctuating sentiment across various asset classes. Global markets faced a series of challenges, including concerns over inflation, central bank policies, geopolitical tensions, and supply chain disruptions.
On equity, UK market was among the best performing regions, with FTSE 100 (TR) returning 2.2% in Q3, thanks in part to its large tilt toward the energy sector. The US stock market, in contrast, experienced a modest decline in Q3, with S&P 500 losing 3.3% and Nasdaq 3.9%. Investor sentiment was influenced by debates over the Federal Reserve's monetary policy and apprehensions about rising inflation. While inflation increased in August, it seems to stabilise after a rapid succession of rate hikes. However, Fed policymakers' comments indicate that another rate hike is likely before the end of the year and that rates might stay at elevated level for longer than initially thought as economy seems to be performing strongly.
Underperformed the broader emerging market, Chinese stocks fell sharply in August, with the country's real estate sector performing particularly poorly as investors questioned Beijing's ability to provide enough stimulus to get the world's second-largest economy back on track. Investors reacted strongly to the global economy's headwinds posed by tight oil markets, with Brent crude oil prices rising by 28% over the quarter.