September was a mixed month for global risk assets, as economies around the world continued to balance full reopening with ongoing regional coronavirus outbreaks. Global equities moved mostly lower, the oil complex sold off sharply, the US dollar index strengthened, and the US yield curve was little changed. The Federal Reserve indicated that it would continue to support the economic recovery by setting expectations that it would keep interest rates near zero for at least the next three years. US and Chinese August manufacturing and non-manufacturing PMI readings all held above 50, pointing to continued economic expansion. Yoshihide Suga was elected as Japan’s new Prime Minister, and with several key cabinet positions unchanged from the prior Abe administration, little policy change is expected in the near term. The most recent initial US jobless claims report (for the week ended September 26) showed that weekly initial jobless claims totaled 837,000, while continuing claims fell to 11.8 million. The August US jobs report showed that 1.4 million jobs were added during the month, the unemployment rate fell to 8.4% (from 10.2%), the labor force participation rate rose to 61.7%, average hourly earnings increased 4.7%, and the total labor force rose to 160.8 million, of which 147.3 million were employed.
Developed market equities moved mostly lower in September, (see page 8) with gains in Japan (+0.5%), and the largest losses in Hong Kong (-5.2%), Italy (-3.9%), and Australia (-3.8%). US large caps slightly underperformed small caps, with the Russell 2000 down 3.3%, and the Russell 1000 down 3.7% (see page 3). The best performing S&P 500 sectors in September were Materials (+1.3%), Utilities (+1.1%), and Industrials (-0.8%), and the worst performing were Energy (-14.5%), Communication Services (-6.5%), and IT (-5.4%). Large cap growth (-4.7%) underperformed large cap value (-2.5%) in September (see page 3). Emerging market equities mostly moved lower (see page 9), with the biggest gains in Mexico (+2%), Korea (+1.5%), and India (+0.9%), and the biggest losses in Indonesia (-11.1%), Thailand (-7.9%), and Brazil (-4.6%).
In currencies, the USD Index strengthened in September (see page 10), with the Japanese Yen (+0.4%) posting gains against the USD, and the Norwegian Krone (-6.4%) showing the largest loss. Emerging market currencies were mixed against the USD, with the biggest gain in the Korean Won (+2%), and the biggest loss in the Turkish Lira (-4.8%).
The US interest rate curve was little changed in September (see page 12). 10 year rates closed the month at 0.68%, from 0.70% at August month end. US investment grade spreads tightened, while high yield spreads slightly widened (see page 13).
In commodities, the GSCI index fell (-3.6%) in September (see page 11), with gains in Livestock (+6.3%), and Agriculture (+4%), and losses in Industrial Metals (-2.2%), Precious Metals (-5.7%), and Energy (-8%). Within individual commodities, Lean Hogs (+19.6%), Soybeans (+7.4%), and Corn (+5.9%) saw the biggest gains, while Natural Gas (-19.9%), Silver (-17.8%), and Coffee (-14%) saw the biggest losses. Gold was down 4.2% in September.
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