Both September and Q3 were market bloodbaths, periods most asset managers wish they could have completely avoided - perhaps they should have just sold in May? But it was not all red. As the following breakdown by Deutsche Bank shows there were quite a few asset classes that did quite well not only in September but in the third quarter. Here is the full breakdown.
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Q3 2015 proved to be the weakest quarter for risk assets for some years and most market participants are probably glad to see the back of it. Indeed Q3 saw the poorest quarterly performance for the S&P 500 (-6.4%) and the Stoxx600 (-8.4%) since Q3 2011. It was also the worst quarter for the Nikkei (-14%) since 2010 whereas in EM the Shanghai Composite (-28%) and Bovespa (-15%) posted their worst quarterly scorecard since 2008.
In many ways September picked up many of the unresolved issues that we left behind in August. The sell-off in commodities and EM gained further momentum as recessionary fears deepened. That was enough to raise further questions around sustainability of global growth and DM valuations were certainly tested at various points. Macro themes aside, micro stories added their fair share of uneasiness for investors. The sharp sell-off in VW and Glencore were just two of those that amplified the weaknesses into the quarter end. Putting all those aside, the center stage event for September was clearly the seminal FOMC decision, in which the Fed decided against a hike even though it had been flagging it repeatedly earlier in the summer. This lower central bank confidence in the outlook has perhaps added further uncertainty to global markets.
Taking a closer look at the specific moves in September, we saw 27 of 42 of our selected global assets finish the month in negative territory. Looking beyond the outperformance in corn (7%), wheat (4%) and Greek equities (6%), the remaining assets which managed to eke out some gains were mostly core governments or variants of US IG products but even then we are looking at a relatively modest sub-2% gains for these. US credit started September at pretty wide levels and has held in better than its European peers over the last month. On the other end of the spectrum, Brent (-11%), Nikkei (-8%), Stoxx600 Banks (-7%), IBEX (-7%) and WTI (-8%) underperformed the most in September. Away from those, the total returns of key asset benchmarks such as the S&P 500, US HY, and the DAX were down -2.5%, -4% and -6% respectively. In EM, equity markets in Brazil and Russia were down 5% and 3% respectively in local currency terms. The flight away from EMFX also meant that weaknesses for EM were compounded in Dollar terms. For instance the BOVESPA is down 40% in Dollar terms YTD whereas Latam bond markets are down 20% YTD. Away from the Latam weakness, China continues to grab its fair share of investors’ attention. The Shanghai Composite dropped for its fourth consecutive month to bring its YTD losses to just under 5% even though following the devaluation scare in August, the past month was a relatively stable one for the Renminbi.
Taking a quick look at YTD performances, there is also very little to cheer about as most assets are still lower than where they were at the start of the year. The Russian MICEX (21%) and FTSE MIB (15%) are the only ones with double digit gains while core rates such as Treasuries and Gilts are up by around 2%. EM and growth commodities are still the worst performers with double digit % losses to date. In Dollar terms the performance contrast is even more striking with only a handful of assets in our selected basket actually in positive territory on a YTD basis.
Source: Deutsche Bank