Market Commentary Q3 | 2023
Both global equity and fixed income markets produced negative returns over the 3rd quarter as market participants recalibrated growth and policy expectations. From a macroeconomic standpoint, the trends from the 2nd quarter continued into the 3rd. Growth in the U.S. continued to defy expectations of a slowdown while disinflation continued. However, the consequence of that dynamic is that the policy easing expected next year has become much less likely. Markets repriced rates sharply higher at the end of the 3rd quarter in response to the Fed’s most recent press conference where officials set the stage for holding rates at restrictive levels for longer. Additionally, oil prices surged throughout the quarter, increasing concerns that inflation could prove more difficult to bring down to the Fed’s long-term targets. Throughout the summer, markets increasingly priced a soft landing into risk assets, so it’s unsurprising to see risk assets struggle in the face of renewed tightening concerns. How the evolving dynamic between economic growth and interest rates translates to risk asset performance will likely continue to dictate market movements in the near-term.