Good morning,

Equities enjoyed a positive start to last week, with Monday and Tuesday experiencing the best back to back days since April 2020. However, it is worth noting that the price of admission was the confirmation on the previous Friday that we have now seen three consecutive negative quarters for equities. It highlights the point we have tried to illustrate in the past: some of the best days for equity markets can happen during very volatile periods, and trading in and out of the market is fraught with risks.

The above points were amongst a number of the key topics we discussed at our in person events last week. We also covered the latest positioning across our multi-asset funds, where we maintain a bias for equities over fixed income (albeit less so than at times in recent years). Our most recent update to our asset allocation has been to increase the duration of sovereign bonds across relevant portfolios, moving from a strong underweight stance to being more neutrally positioned. With core eurozone yields close to their highest levels in a decade, we may be experiencing a structural inflection point within sovereign fixed income markets.

We are also hosting a series of  regional seminars, which commence this week. For those who were unable to make it to any of the events last week, and would like to hear more in relation to the above,  please see the full listing here.

As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.

Weekly Investment News

US equities rose from an almost two-year low on Monday and Tuesday, with the S&P 500 rising 5.6%, its best two-day move since 2020. The release of the US manufacturing PMI earlier in the week conversely helped markets as it surprised to the downside, falling to 50.9 from 52.8 in August, missing expectations for a more modest decline of 52.2. This raised investors’ hopes of the Fed easing its ongoing aggressive rate hiking policy somewhat, highlighting the last quarter’s unusual market dynamic where bad news is often good news for investors.

However, Friday saw markets fall as the US unemployment report showed a gain of 263,000 new jobs with the unemployment rate also fell to multi-year low of 3.5%. Although lower than recent monthly totals, it continued the trend of healthy jobs growth and a tight labour market. With investors expecting another 75bps hike from the Fed, the US market lost nearly 3% on Friday to finish the week down slightly. In US Treasuries, yields rose in reaction to hawkish sentiment about inflation with the yield on the 10-year note up 8 bps to 3.88% on Friday. This also came as OPEC+ agreed to slash oil production by 2 million barrels per day, effectively putting a floor on oil prices, threatening to sustain inflation for longer.

Within the Eurozone, the German 10-year bund yield rose back towards recent highs, as minutes of the ECB’s September meeting showed officials are increasingly worried about high inflation. Of particular interest to investors was the spread between German and Italian 10-year bonds. This rose to as high as 251 bps as the Italian 10-year bond yield rose 20 bps to 4.701%, heading towards a nine-year high above 4.9%. Within the UK, the BoE’s market intervention and subsequent government policy U-turn regarding the tax-cutting ‘Mini-Budget’ caused yields to drop sharply as the chaos subsided. On Wednesday the ratings agency Fitch, downgraded the outlook on the UK's government debt from stable to negative.

To download a PDF of last weeks' market movements and economic news, click below: