Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
INVESTORS are looking both backwards and forwards this week as we wrap up the third quarter and look towards the final three months of the year.
Third quarter review
In the rear-view mirror is a July-September period in which shares largely moved sideways. Japan topped the leader-board in terms of countries thanks to a re-invigorated vaccination programme and a new Prime Minister. Even so, it only rose 5% on the quarter.
Other developed markets were flat, with the US, UK and continental Europe all ending the quarter where they started. The laggards over the summer and early autumn have been China and other emerging markets, down nearly 10%.
Large growth shares kept the stock market’s head above water, with Bitcoin, commodities and real estate also doing reasonably well. The underperformers in the quarter were government and investment grade bonds, gold and emerging market investments, both shares and bonds.
Markets don’t look back for long though. In focus soon will be third quarter earnings reports, with forecast growth of 28% in the US. That sounds good but it compares with 54% in the first quarter and 96% in the second. Flagging expectations will most likely put further downward pressure on valuations but markets can hold up if those earnings are delivered. A wobble in 2010 in similar circumstances soon shifted gear into a renewed bull market.
There are no big central bank meetings but monetary policy will be in the spotlight on Friday when the September non-farm payrolls employment report is unveiled. Fed chair Jay Powell has already said that inflation is high enough to warrant tighter policy; his second trigger is the jobs market and anything other than a big employment shortfall will pave the way for a tapering of bond purchases from November. Reducing by $15bn a month, that process will be wrapped up by next summer. And then it will be all about rate hikes.
Good Money week
This week is Good Money week when investors are encouraged to look at their portfolios through an environmental, social and governance (ESG) lens. This year, doing the right thing is particularly in focus in the run up to next month’s COP 26 climate summit in Glasgow.
What else to watch out for?
It’s also a busy week on the economic front. Apart from Friday’s jobs data, the key focus will be purchasing managers index surveys in the US, UK and Europe. Those will provide some guidance as to whether markets are right to have started worrying about wages, margins and inflation, where Turkey has already produced the week’s shocker: The Consumer Price Index (CPI) there has hit 20%. The UK has house price data from Halifax. On the corporate front, it’s the pre-earnings season lull but on this side of the pond we can look forward to reports from Tesco and Imperial Brands among the blue-chips. In politics, it’s all about the governing Conservative party’s autumn conference.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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