Markets declined further in September, marking a second consecutive down month for both stocks and bonds. Interest rates marched higher, and the Treasury curve flattened with the 10-year yield topping 4.6% late in the month; mortgage rates also ended higher. On the economic front, the United Auto Workers initiated the first phase of a worker strike, while the U.S. government narrowly averted a shutdown at month-end by passing a temporary resolution.
Global equities finished down in September, with non-U.S. stocks holding up slightly better than domestic equities. Higher interest rates have put pressure on the high-flying tech stocks that led markets through the first half of 2023. Overseas, the European Central Bank raised short-term rates 25 basis points, and the Bank of England paused in September, ending a 14-month streak of hikes. Developed international stocks ended 3.4% lower for the month, while emerging markets lost 2.6%.
While the Federal Reserve paused in September, and August inflation met market expectations, interest rates continued to edge higher during the month, with most of the volatility in the 5-10 year part of the curve. Ten-year Treasury yields ended the month at 4.58% after touching an intraday high of 4.68% on September 28. Credit outperformed as spreads remained tight. Broad bonds were down 2.5%, while high yield corporates lost only 1.2% for the month.
1 – Russell 1000, 2 – Russell 2000, 3 – MSCI EAFE, 4 – MSCI Emerging Markets, 5 – Bloomberg US Agg, 6 – Bloomberg US Long Gov/Credit
7 – Bloomberg US Corporate High Yield, 8 – Bloomberg Gold Subindex, 9 – Bloomberg Commodity
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