GTC EB Trendline – September 2016

Global: Odds on for a December rate move

In a quarter that was largely positive for global markets, volatility across both equities and fixed income was considerably lower. The MSCI World Equity Index returned 4.38% in Dollar terms over the quarter whilst the MSCI Emerging Market Equity Index returned 8.32% in Dollar terms. U.S. equities continued to improve despite expectations of an interest rate rise before year end. Information technology and consumer discretionary sectors led Eurozone equities higher. Emerging markets gained impetus largely driven by a search for yield.

Bond Markets remained relatively calm after the extreme volatility that was experienced at the end of the previous quarter. With the surprise Brexit result a thing of the past, July saw markets return to stability and focus on expected moves on the part of the world’s major central banks.

U.S. economic data continued to confirm an improving economy and expectations of a possible December interest rate hike remain firmly in place. Federal Reserve chair Janet Yellen stated that the argument for a rate hike at year end had “strengthened”. This view was confirmed following the release of the minutes of the Federal Open Market Committee (FOMC) and this despite mixed macroeconomic signals with U.S. non-farm payroll numbers declining in August albeit following strong numbers in June and July.

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