September Market Review

There were some very big macro stories dominating this month. 

Going into the month, we had the impending Fed easing. The central bank duly delivered, slashing rates by 0.5%. In the run-up, markets nervously judged the size of the cut. Post-Labour Day, US markets plummeted in a move reminiscent of early August, with losses across the board. Nvidia initially led the way, dropping $80 billion on 3 September.  Having lowered rates, Fed Chair Powell has since added a more hawkish tone, with the likelihood of quarter-point cuts going forward, potentially starting in November. 

We had geopolitical instability in the Middle East intensifying as Israel’s fight against Hezbollah and the death of the leader, Hassan Nasrallah. Then, at the end of the month, we had Israeli special forces carrying out limited incursion operations in Lebanon, with tanks massed on the border. What this means for the region and global repercussions has yet to be determined. 

We also had an aggressive China stimulus to reinvigorate the declining growth story. Central to this is a broad package of measures that included the PBOC cutting the key short-term interest rate and reducing the amount of money banks need to hold in reserve 

Inflation is certainly falling across all regions, with the US annual inflation now down to 2.2%, fueling expectations of further interest rate cuts.  Bloomberg figures show inflation below 2% across Europe and even in parts of Germany. There is pressure on ECB President Christine Lagarde to ease rates further - we will have to wait until 17 October.  In the UK, the figure is 2.2%, the same as July, but ultimately the picture is improving. 

Equities were mixed during the month.  In the US, even with the volatility the S&P 500 still managed to hit a new high, ultimately closing +1.4% and the Nasdaq +2.0%. In Europe, the FTSE 100 laggards weighed on the index to close -1.7%, while the Dax bounced +2.2%. In Asia, the Nikkei was -1.9% and in China, spurred on by stimulus, the Shanghai Composite Index was up a mighty +17.4%. 

The Bloomberg Commodity index had a very strong month, +4.9%. China’s stimulus was a huge metal boost, with copper closing the month +12.7%. Precious metals also had a very good month, with silver benefiting from Fed policy and China resurgence to close +7.7% and gold +5.0%. This, though, was not reflected in September oil prices, which fell to their lowest levels this year due to oversupply on initial concerns about China’s slowing economy and news that Libyan oil was set to resume full production.  A Financial Times story on Saudi Arabia’s plans to pump oil regardless of price concerns then sent the black gold into a tailspin and by the end of the month, WTI was -7.1% and Brent -6.7%.

Crypto also appears to appreciate Fed action, equity bullishness and perhaps a lack of scandals (unless you count Caroline Ellison’s two-year jail sentence for her role at FTX) and Bitcoin closed the month +7.1%.