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Third-quarter 2022 market review with Jim Smigiel

Chief Investment Officer Jim Smigiel provides an overview of the global financial markets during the third quarter and our perspective on them.

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Jim - Hi, I'm Jim Smigiel, SEI's Chief Investment Officer with our third quarter review and our outlook into year end. Over the next few minutes, I will provide an overview of the global financial markets and our perspectives on them. The song remained the same during the third quarter, with the US Federal Reserve and other central banks raising interest rates aggressively in an effort to counter uncomfortably high inflation. While the start of the fall season coincided with hard times in financial markets, if we look back to summer, markets actually started off on a positive note. Softening economic activity gave investors hope that central banks would increase interest rates by less than expected. This spur to stock market rally well into August. Fed Chairman Jerome Powell shattered that illusion, however. While during his Jackson Hole speech, he explained that lower growth and softer labor markets will likely be the unfortunate cost of hiking interest rates to fight inflation. His remarks sent stocks tumbling through the end of the third quarter. When all was said and done, developed market equities fell by less than emerging markets during the third quarter. The US saw a relatively small decline when compared to Europe and the UK. China and Hong Kong had the steepest declines while Latin American shares had the only positive regional performance for the period. While there's no doubt that high inflation continued to haunt investors and consumers, commodity prices were actually mixed for the quarter. While gasoline is still a relatively expensive commodity, crude oil prices continued to come back down towards levels more in keeping with their long term averages. Natural gas prices, meanwhile, swung wildly throughout the quarter. A dramatic increase through mid-August moderated somewhat by the end of the quarter. Meanwhile, the strength of the US dollar was felt in just about every corner of financial markets. The performance of fixed income serves as a useful lens for considering the strength of the dollar and the impact of rising rates. US high-yield bonds benefit from a strong dollar and have lower interest rate risk than higher quality bonds of comparable maturities. This helped their losses stayed lower than other fixed income asset classes during the third quarter. At the other end of the spectrum, global sovereign bonds were the worst performer, suffering from a combination of weaker foreign currencies and high interest rate risk. Although the third quarter did little to soothe investor nerves, consumers and businesses remain in solid financial shape. While a global recession is forming on the horizon and asset prices will likely face further declines from here, we do think that the worst of it is behind us. In volatile times like these, we believe a focus on diversification, fundamentals, and sound planning matter more than ever. And on behalf of everyone at SEI, thank you as always for your trust and confidence.

Important information

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Positioning and holdings are subject to change. All information as of the date indicated.  There are risks involved with investing, including possible loss of principal. This information should not be relied upon by the reader as research or investment advice, (unless you have otherwise separately entered into a written agreement with SEI for the provision of investment advice) nor should it be construed as a recommendation to purchase or sell a security. The reader should consult with their financial professional for more information.

Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice.  Nothing herein is intended to be a forecast of future events, or a guarantee of future results. 

Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain cases have not been updated through the date hereof.  While such sources are believed to be reliable, neither SEI nor its affiliates assumes any responsibility for the accuracy or completeness of such information and such information has not been independently verified by SEI.

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