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MARKET MONITOR 
|
September 23

MARKET MONITOR | September 23

Chart of the Week


MONETARY POLICY

Inflation has remained elevated across many of the major developed markets suggesting that central bank policy could be more hawkish than expected in the near term. The share of global central banks that are currently raising their respective interest rates is at a record high; nearly 80% of major central banks are hiking. This proportion could remain elevated for an extended period if inflation prints continue to be above respective targets.

Source: Haver Analytics, Goldman Sachs Global Investment Research.

Market Summary


GLOBAL EQUITIES

Equities dropped last week as interest rates rose and concerns regarding recessions in major economies persisted. In the US, the S&P 500 fell -4.63% on the back of the Fed’s 75 bps rate hike and heightened expectations for steeper near-term monetary policy tightening. In Europe, the FTSE 100 and STOXX 600 declined -3.01% and -4.34%, respectively, following the BoE’s greater-than-expected interest rate hike as well as an escalation in rhetoric in eastern Europe. Read More

COMMODITIES

Oil prices slid last week to their lowest level since January despite somewhat more limited supply as demand continued to weaken and global interest rates largely rose. Ultimately, WTI and Brent closed at $78.74 and $86.15 per barrel, respectively. Gold prices ended lower last week at $1668.80 per ounce on the back of a strong US dollar. Read More

FIXED INCOME

Global sovereign yields largely rose last week as the Fed’s 75 bps rate hike sparked a day that saw many central banks raising rates by larger-than-expected margins. The US 2-Year and 10-Year yields notched 11-year highs, finishing at 4.21% and 3.70%, respectively, as the Fed remains committed to curbing inflation. The 10-Year German Bund yield hit a 9-year high last week, closing at 2.02% following hawkish comments from the ECB governing council. Read More

FX

The US dollar index notched another 20-year high against a basket of currencies, appreciating 2.76% as the Fed keeps outpacing other central banks in rate hikes. The euro fell to $0.9672 as Russian announcements to send more troops generated more uncertainty around Europe’s economic outlook. The pound sterling dropped to $1.0849 with the BoE’s more cautious 50 bps rate hike. The Japanese yen reached a high of 145.90 before closing at 143.37 following the government’s decision to intervene in FX markets. Read More

Economic Summary


MONETARY POLICY

In the US, the Federal Open Market Committee hiked 75 bps to 3.125%, as largely expected. Throughout much of this year, the Fed’s messaging has been clear and consistent, but comments from last week’s meeting underscore that the Fed is eager to curb inflation even if it means further economic deceleration. Goldman Sachs Global Investment Research (GIR) now predicts 75/50/25 bps rate hikes in November/December/February, respectively, leading to a 4.375% rate at the end of this year and a terminal rate of 4.625% sometime in 2023. In the UK, the BoE raised its key interest rate by 50 bps to 2%. There was a hawkish tone shift with three MPC members voting for a larger 75 bps increment. Considering this split, a tighter labor market, and possible upgrades to growth, GIR now looks for 75 bps hikes at the next two MPC meetings (November and December) and expects a terminal rate of 4.5%, up from 4.0% previously. Read More

ACTIVITY

US Manufacturing PMI for September rose to 51.8 from 51.5 previously, and US Services PMI for September rose to 49.2 from 43.7 previously. Both metrics come in higher than consensus expectations as a hawkish Fed has telegraphed that to control inflation, activity needs to cool. In Europe, September flash PMIs indicated further slowdown in the private sector with Euro area and UK Composite PMIs falling to 48.2 and 48.4, respectively. The rate of decline accelerated in both regions as higher costs and a weaker economic outlook continued to weigh on consumer spending. Read More

LABOR

US initial jobless claims rose to 213K last week for the week ending September 17, stopping a 5-week streak of declines. The US labor market remains tight despite the Fed’s attempt to cool demand with its third straight 75 bps rate hike. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
-6.37%
-6.73%
-7.08%
Medium
-7.38%
-7.55%
-7.86%
Small
-8.10%
-8.83%
-9.54%
Value
Core
Growth

YEAR-TO-DATE

Large
-15.59%
-22.49%
-28.63%
Medium
-18.32%
-22.84%
-30.98%
Small
-19.29%
-24.48%
-29.70%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
-5.60%
-6.82%
-8.02%
Medium
-7.83%
-8.50%
-9.32%
Small
-8.08%
-8.88%
-9.71%
Value
Core
Growth

YEAR-TO-DATE

Large
-15.29%
-23.14%
-30.67%
Medium
-20.97%
-26.07%
-32.68%
Small
-19.67%
-25.52%
-31.46%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-1.63%
-2.16%
-5.26%
Corporate
-1.72%
-2.47%
-5.21%
High Yield
-1.72%
-2.56%
-4.85%
Short
Intermed.
Long

YEAR-TO-DATE

Government
-6.30%
-8.49%
-26.80%
Corporate
-7.00%
-10.99%
-26.70%
High Yield
-8.44%
-12.93%
-24.12%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-1.26%
-3.09%
-3.95%
Corporate
-1.24%
-2.98%
-3.89%
High Yield
-2.04%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
-4.28%
-12.74%
-27.13%
Corporate
-5.04%
-16.24%
-27.23%
High Yield
-13.00%
??????
??????
Short
Intermed.
Long

Source: Bloomberg and Goldman Sachs Asset Management (as of 09/23/22)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Sep 26

German GDP (QoQ)
(Cons: 0.1%, Prior: 0.1%)

Tuesday, Sep 27

US New Home Sales
(Cons: 500K, Prior: 511K)
US Cons. Confidence
(Cons: 104.0, Prior: 103.2)

Wednesday, Sep 28

US Pending Home Sales
(Cons: -4.0%, Prior: -1.0%)

Thursday, Sep 29

German CPI (YoY)
(Cons: 8.8%, Prior: 7.9%)

Friday, Sep 30

Euro Area CPI (YoY)
(Cons: 9.4%, Prior: 9.1%)
US Core PCE (YoY)
(Cons: 4.7%, Prior: 4.6%)
UMich Cons. Sentiment
(Cons: 59.5, Prior: 59.5)

VIEW LESS DISCLOSURE

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