The major US equity indexes closed mixed with a 1.6% weekly gain for the Nasdaq and a -0.3% decline for the Dow as Large-cap growth stocks sharply outperformed value and small-caps. An equally weighted version of the S&P 500 Index lagged its market-weighted counterpart by the largest margin since March. Similarly, the S&P 500 outperformed the small-cap Russell 2000 Index by the widest margin over the same period. The most important macro data of the week was the US payroll report on Friday. Employers added 336,000 nonfarm jobs in September, roughly double consensus estimates. The details in the jobs report offered a more nuanced picture, however, which appeared to foster a market rebound.

The current surge in long-term interest rates is predominantly propelled by real rates, strongly influenced by the synchronized reduction of balance sheets by most developed central banks.

Q3 2023 in the rear view After a strong first half of the year, the mood has shifted during the Summer as markets are adjusting to the reality of “persisting inflation & sticky rates”, a narrative which is adding pressure on equities and valuations. What has also changed in recent weeks has been some sense that the bill for the US fiscal profligacy is coming due, pushing long-dated bond yields to record highs. Here are 10 stories to remember from an eventful Q3 2023.

US House of Representatives ousted Kevin McCarthy as speaker, a first in U.S. history. This is likely to add to bond and equity markets volatility.

US 10-year yields are at their highest since 2017, not a single analyst sees the US 10-year rising above 5% over the next 6 months and rising bond yields weigh on equity markets. Each week, the Syz investment team takes you through the last seven days in seven charts.

The worst month for S&P & Nasdaq since Dec 2022. Higher oil prices, higher yield and the increasing likelihood of a U.S. government shutdown continue to weigh on investors’ sentiment. The yield on the 10-year U.S. Treasury note peaked above 4.6% on Wednesday. However, yields ticked modestly lower after the release of encouraging eurozone and U.S. inflation data. The S&P 500 Index suffered a fourth consecutive weekly pullback. Within the index, utilities lost the most ground. Energy stocks, on the other hand, outperformed.

The world of fixed income investments faced significant headwinds in Q3 2023, as reflected in a roughly 4% decline in the Bloomberg Global Aggregate Bond Index, a prominent benchmark in the global fixed income market.

The Fed pauses rate hikes but fails to calm markets; S&P 500 down 2.9%, US bond yields rise. Each week, the Syz investment team takes you through the last seven days in seven charts.

The Fed held its September meeting and the message from Jay Powell was clear: they will continue to keep rates elevated until inflation moves more convincingly toward 2.0%. The Fed held rates steady at 5.25% - 5.5% at this meeting but kept the option of an additional rate hike on the table, maintaining its outlook for a peak fed funds rate of 5.6%. The S&P 500 and the technology-heavy Nasdaq Composite reacted negatively, dropping 2.9% and 3.6% respectively. That marked the third straight negative week and worst weekly performance since March for each. As Vanda Research notes, inflows into the artificial intelligence (AI) sector continue to decline.

The hawkish pause by the Fed has sent U.S. real yields to levels not seen since 2008, triggering a market selloff in credit.