Welcome to our latest issue of Smart Money.

This quarter started with a tough period for global markets, as investor confidence was shaken by persistent inflation and the likelihood of higher interest rates for longer. September and October saw risk assets fall as bond yields hit multi-year highs. However, a notable change happened in November. Cooler inflation figures and a more measured tone from central banks triggered a widespread rally across both equities and fixed income, helping many markets recover their earlier losses and finish the period in positive territory.

In the United Kingdom, equities faced headwinds from persistently high inflation and a muted economic outlook. While large-cap stocks demonstrated some resilience, domestically focused companies struggled amid concerns over consumer spending and future growth.

The Eurozone reflected this challenging environment, with economic data suggesting a potential recession. However, a significant drop in headline inflation towards the end of the period provided a much-needed boost, lifting shares as markets started to anticipate possible rate cuts from the European Central Bank.

Across the Atlantic, the United States went through a turbulent few months. Technology stocks led a market decline into October before starting a strong recovery in November. This rebound was driven by growing confidence that the Federal Reserve has finished its interest rate hikes, sparking a broad-based rally.

Japanese equities continued their strong performance, supported by solid corporate earnings and signs that the country may finally be emerging from its long battle with deflation. Yen weakness provided an additional tailwind for the market’s large exporters.

Asia ex-Japan markets showed a mixed performance, heavily affected by the trajectory of the Chinese economy, which continued to exhibit signs of weakness. Conversely, other markets in the region benefited from the global technology rally and rising investor risk appetite in November.

Emerging markets broadly followed the sentiment of developed markets, declining in September and October before rebounding strongly. A weaker US dollar and the prospect of a less aggressive Federal Reserve offered significant support, although country-specific risks remain an important consideration.
The global bonds market experienced a notable shift. Yields rose to their highest points in over a decade before falling sharply in November, delivering strong returns for investors. This shift was a direct result of slowing inflation and the coordinated change in central bank messaging.