October 26, 2022
Global equities posted another quarter of declines in Q3, with the MSCI ACWI index falling 6.8% during the quarter. Year-to-date, the index has declined 25.6%. The S&P 500 fell 4.9% during the quarter and is now down 23.9% year-to-date. International developed stocks declined 9.4% in Q3, leaving their year-to-date decline at 27%. A stronger dollar detracted 580 bps from US$ returns during the quarter. Emerging market equities fell 11.6% in Q3 and 27.2% year-to-date. Asian emerging markets were the worst performing region during the quarter, while Latin America posted modest gains. Small-caps outperformed during Q3, although large-caps remain modestly ahead year-to-date. Value stocks have held up better than growth stocks in 2022, despite modest underperformance in Q3. The consumer discretionary and energy sectors were the only sectors with positive performance during Q3 and energy remains the only positive sector year-to-date. Communication services has been the worst performing sector during Q3 and year-to-date.
Valuations modestly improved during the quarter as prices declined more than earnings. The trailing P/E ratio on the MSCI US Index fell from 18.9 to 18.31. International developed stocks remain more reasonably valued than US stocks, although Europe faces a challenging winter with elevated energy prices and potential supply shortages due in large part to the continuing conflict in Ukraine. Emerging market valuations remain more attractive than developed markets. Monetary policy remains accommodative in China, although challenges in the property sector and COVID restrictions continue to weigh on the outlook.
The Barclays Aggregate Index declined 4.8% during the quarter. Barclays US Gov’t Index declined 4.3%, but outperformed Barclays US Credit Index, which declined 5%. In September, the Federal Reserve approved its third consecutive 75 basis point rate hike, bringing its policy rate to 3% – 3.25%. Overseas, most other central banks also raised rates, including the ECB and BOE. Japan and China were the only major regions without rate increases in Q3. In the UK, the BOE launched a temporary bond purchase program to ease conditions following the market’s negative reaction to a new budget proposal. After the close of Q3, driven by market reaction, the lion’s share of the new budget proposal was withdrawn, and the Prime Minister resigned capping the shortest tenure (45 days) for a UK Prime Minister ever.
1 The information found in this document was derived from Mercer, The Wall Street Journal and InvestorForce. While we believe these data sources and information to be reliable, its accuracy and completeness are not guaranteed. The views contained in this presentation represent the opinions of GYL Financial Synergies, LLC as of the date hereof unless otherwise indicated. This and/or the accompanying information was prepared by or obtained from sources GYL Financial Synergies, LLC believes to be reliable but does not guarantee its accuracy. The report herein is not a complete analysis of every material fact in respect to any security, mutual fund, company, industry, or market sector. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance does not guarantee future results.
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