U.S. stock indexes again hit record highs in September but sentiment and economic events led to a mixed set of results for the global markets. The markets have a lot to digest and mixed results seem appropriate considering the multi-level economic crosswinds.
In equities, global large-cap indices were higher in September. Small cap and emerging markets indexes moved lower during the month as a risk to the global economic picture from trade tensions between China and the Trump Administration reached new highs, impacting the riskier segments of the equity market. As expected the Federal Reserve again boosted rates and appears set to continue to do so several more times. The 0.25% increase in target Federal Funds rate (to a range of 2.0% – 2.25%) impacted the higher quality, less economically sensitive segments of the fixed income market such as US Treasury, mortgage and investment grade sectors.
The global economic picture is clouded by significant events. Increasing trade tariffs between the USA and China, higher oil prices, in the eurozone a weakening in manufacturing surveys, also currency based rate policies have highlighted the risk in some economies. Equally important are the interest rate increases by the US and their impact on US dollar valuation and as a potential disruption to economic growth and risk appetites
Investing is full of uncertainty and being prepared for the unknown is a good precaution. At Laurentide, we believe holding risk-appropriate, well-diversified portfolios is a great way to manage uncertainty.
John Kirby is a Principal and Co-founder of Laurentide Advisory