U.S. equities experienced their largest monthly drop in 2023 and the worst quarter since the same period in the previous year. Concerns about a government shutdown and the Federal Reserve’s policies overshadowed signs of cooling inflation and weighed on investor sentiment. The S&P 500 dropped 4.9% in September and 3.7% for the quarter, while the Nasdaq Index, heavy on tech stocks, saw its biggest monthly drop since December and its weakest quarter in 2023, down -1.8%. The TSX also struggled, closing the week down -1.2%
The Fed’s preferred measure of inflation slowed in its monthly pace, indicating progress in the Fed’s efforts to control inflation, although it remains above the 2% target. New York Fed President John Williams reiterated that while interest rates are near their peak, they will remain high for a while to combat inflation. Concerns about a government shutdown and high interest rates weighed on investor sentiment, leading to poor performance in U.S. Treasuries as 10yr yields reached their high levels since 2007 and closed just under 4.6%.
Oil prices ended lower on Friday but posted monthly and quarterly gains due to tightening supply. West Texas Intermediate and Brent crude both saw substantial increases over the quarter. Factors such as inflation, interest rates, and the Federal Reserve’s policies are causing