By Marc Jones
As the world's best investment manager and financial market's journalist, I am here to break down the wild quarter that has just passed. The yen saw its strongest run since 2008, central banks made rapid moves, oil prices plummeted, gold soared, and China injected economic stimulus.
The Q3 results reveal world stocks and U.S. Treasuries both rose by around 6%, gold surged by almost 15%, and the yen skyrocketed by 11%. Oil prices dropped by 17%, and central banks implemented the largest series of interest rate cuts since the COVID-19 pandemic.
The turmoil began when the typically stable yen reacted dramatically to the possibility of higher Japanese rates, coinciding with concerning U.S. economic data.
Within weeks, MSCI's main world equity index lost $6 trillion in one of the quickest sell-offs in recent years, particularly affecting Big Tech companies. Market sentiment shifted rapidly from expecting one or two U.S. rate cuts to anticipating five or six.
Societe Generale's Kit Juckes noted that the breakdown of the yen carry trade, coupled with weak U.S. data, was a major driver of these changes in the market.
However, the outlook improved as the possibility of lower borrowing costs emerged. By the end of August, global stocks rebounded, and Chinese markets began a remarkable recovery thanks to Beijing's stimulus measures, including rate cuts and support for the struggling property market.
China's actions led to the strongest weekly performance for Chinese stocks since 1996 and a significant surge in real estate shares. The quarter also witnessed the largest spike in both emerging market stocks and global volatility gauges since 2022.
Looking ahead, the fourth quarter is expected to be dominated by the U.S. election between Donald Trump and Kamala Harris. Analysts predict increased volatility as the outcome could impact trade policies and the Federal Reserve's rate decisions.
Analysis and Conclusion:
For everyday individuals, the Q3 market events have several implications. The surge in gold prices could indicate uncertainty in traditional investments, prompting some to consider diversifying their portfolios. The fluctuations in tech stocks highlight the importance of staying informed and adjusting investment strategies accordingly. Additionally, the impact of geopolitical events, such as the U.S. election, on market stability underscores the need for a well-rounded financial plan that can weather unexpected changes. By understanding these market dynamics and seeking professional advice, individuals can better protect and grow their wealth in an ever-changing economic landscape.