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Market commentary: What happened in September

Published on 13/10/2023



Market update v3

Following on from August’s poor market performance, September was again nothing to shout about. Share markets have a habit of going south in September, and this year was no exception - like we seem to be experiencing in many areas, things were exacerbated. Since 1928, the US market has averaged a 1.1% decline in September and in 2023 it managed to fall 4.8% (making it their worst month of the year so far). This also made the US one of the worst performers, but European markets also fell 2.8%, while New Zealand and Australian markets were both down about 2%. 


Major headwinds for markets last month included both higher global oil prices and higher interest rates. After a couple of months’ reprieve, concerns have been building again that central bank action to slow persistent inflation will cause a recession. So far the major economies around the world seem to be holding on - in fact they’ve been remarkably resilient. Investor attention is firmly on economic data releases to see if the interest rate hikes already implemented, begin to take effect and hamper inflation. 


Global bonds saw yet another poor month as well, with the US 10-year bond reaching yield levels unseen since 2007. NZ bonds didn’t do any better - with the local 10-year bond yield breaking above 5.0% for the first time in almost 12 years. Longer-term bond yields are impacted not only by expectations around inflation, but also by expectations for economic growth and the risk premium required by investors to hold their bonds. Increasing yields mean that it will cost companies (who issue the bonds) more to borrow, potentially providing investors with a compelling alternative to shares.


As always, it’s important to remember that investing is a long-term game to build wealth. In this way it’s important to remember that short-term volatility is to be expected (especially in higher growth assets like shares, but sometimes also in more conservative assets like bonds, as we’re seeing now).


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