An investor labelled “September Effect” was possibly a cause for the negative share market performance during the month, as stock returns fell back further and bond yields rose once again. This effect refers to the historical tendency for stocks to perform poorly during the month of September. Global share markets declined by 3.7% in local currency, with US stocks performing worse than both developed and emerging share markets.

Investors also heard the familiar “higher for longer” rates message from central banks. Although many central banks in developed markets are close to the end of their rate tightening cycles (where the rates are raised multiple times), the market began to doubt that the rates would start easing soon. In September, investor sentiment caused bond yields to spike, especially for long-term bonds. Energy was the only equity sector to provide a positive return as WTI Crude Oil jumped 8.6% (in USD).

Economic dataflow for September was mixed although consistent with the struggling economy in the third quarter of 2023. New Zealand's current account deficit, which occurs when a country is spending more than they’re earning overseas, was also announced to have shrunk to 7.5% of GDP in June. This decrease was smaller than expected due to a slow economic rebound and data revisions. The NZX50 returned -1.9% for the month, while the ASX200 returned -2.8% (AUD).

Worries about the Chinese property market persist as Evergrande, a major Chinese developer, had its shares suspended from trading in Hong Kong due to significant price drops. This caused concern among investors in nearby countries such as South Korea and Taiwan. Listed Property and Infrastructure returned -5.4% and -4.0% respectively.

Significant developments for September:

• Driven by the obstructed US debt ceiling, which is a self-imposed cap on the amount of money the federal government can borrow to pay its bills, a US government shutdown was imminent during September. This caused a frenzy as the Senate raced to draft a bill to fund the government through to November 17^th, hoping to pass the bill before the October 1^st deadline. Ultimately, the bill was signed and passed by President Biden just moments before.
• Yields spiked over the month as markets anticipated higher interest rates for longer. US yields increased by over 0.4% at the longer end of the curve, effecting yields with longer term horizons such as 10-year Treasury Bonds. Yields in other developed countries also rose. This negatively impacted equity sentiment and led to declines in fixed income asset classes and gold.
• Inflation remains a key concern as economic data and rate announcements dominate headlines. The US experienced mixed year-on-year inflation rates of 3.7% headline and 4.3% core (which excludes volatile items such as food and energy). The European Central Bank raised its deposit rate to 4.0%, while the Fed and the Bank of England left interests rates unchanged.