Stop me if you have heard this before, but higher than expected inflation in August led to the Fed continuing to tighten policy by raising rates by another 75 bps. This was the Fed's 3rd consecutive increase of 75 bps and the Fed Funds rate now stands at 3-3.25%. The Fed clearly means business with Chairman Powell saying "We must keep at it until the job is done" and Richard Clarida, who was Vice Chair of the Fed until earlier this year, stating "Until inflation comes down a lot, the Fed is really a single mandate central bank" (their other mandate is full employment).
- Global equities as represented by the MSCI ACWI fell -9.6% for the month and is now down -25.6% YTD.
- The S&P 500 fell -9.2% in September while the MSCI EAFE also declined -9.4%.
- REITs had the lowest returns in September with global REITS dropping -12.4%.
- The strong dollar continues to punish non-US stocks. As an example, the MSCI EAFE USD has a YTD return of -27.1%; however, the MSCI EAFE in local currency is only down -14.5%.
- Somewhat surprisingly, the R2000 Growth is the only benchmark that has any positive return shown for the time periods of the last 1 year or shorter, gaining just +0.2% over the last 3 months.
In fixed income:
- With the exception of cash, all FI benchmarks shown have negative returns across all time periods of 1 yr and shorter.
- It continues to be a duration story as longer dated indexes have done worse vs. their shorter dated counterparts.
- Munis have continued to outperform Treasuries and Corporates during September and the last 1 & 3 year periods.
- Over the last 1 yr, the Bloomberg Global Agg ex-US (hedged USD) has outperformed the Bloomberg US Agg (-9.9% vs. -14.6%).
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As an additional note, please keep in mind that these reflect historical performance of the current models, not necessarily how accounts were invested in the past.