Into the Red Zone
By
👤Pimco
Also Interesting
Monthly Market Update
Volatility returned and pulled markets across the globe into the red. The sell-off in risk assets appeared to have several culprits: hawkish Fed comments, rising interest rates, signs of peak earnings growth and political fragility in Europe. Credit spreads widened and emerging market assets also faced challenges with a strengthening U.S. dollar. But the risk aversion appeared most acute in equities: the S&P 500 dropped 6.8% – its biggest one-month decline since September 2011. After a roller-coaster 10 months, year-to-date returns stood at just 3% only a few weeks after having been at over 10%. However, the U.S. equity market remained ahead of those in Europe, Asia and emerging markets, all of which were well in the red zone. An initial trend higher in sovereign yields early in the month appeared to reverse as bond prices rose and rates fell in response to the deepening risk sell-off. After the dust settled, U.S. yields still ended the month slightly higher with the yield curve steeper. Commodities also were not immune to the broad sell-off, as crude oil prices fell 9% on less optimistic growth expectations and forecasts for higher supply, which dragged inflation expectations lower as well.
By
👤Pimco
