Fund watch

What happened in Q3?

Here are some key themes from the third quarter of 2022:

Central banks get aggressive with interest rate hikes: During the quarter, the US Federal Reserve (the Fed) ramped up its aggressive monetary tightening, raising the Fed funds rate by 150 basis points across its two meetings as inflation in the world’s largest economy remained stubbornly high. Chair of the Fed, Jerome Powell, said the central bank would “keep at it” (tightening monetary policy), until the job is done. Furthermore, he said that to win against inflation it would require “maintaining a restrictive policy stance for some time”.

Central banks in all of the other key regions were seen to be doing similar, with interest rates rising in most other major economies, including in Europe (where interest rates moved out of negative territory), the UK, Canada, Australia and New Zealand.

Earnings hold up well: Despite a challenging time in markets, second-quarter earnings held up reasonably well. Some household names – Apple and Amazon – reported strong revenue numbers and positive guidance, while bricks and mortar companies, such as Home Depot and Walmart also reported strong sales and revenue figures, even though they noted an increase in demand for lower quality items as households feel the pinch of inflation. This was the driver for the stronger performance of markets in July, although the euphoria was short lived as investors focused once more on the challenges facing the major economies.

US dollar surges to multi-decade highs: Currency markets were just as volatile as equity and bond markets during the quarter, with the US currency trading higher versus most of its global counterparts as a ‘flight to quality’ saw the safe haven US dollar in favour. One of the biggest losers was the British pound, which hit an all-time low against the US dollar. It came as the UK government announced plans to increase borrowing in an attempt to stimulate the economy.

This article has been prepared by ANZ New Zealand Investments Limited for information purposes only and it should not be treated as financial advice.

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Past performance does not indicate future performance, and performance can be negative as well as positive. This material is for information purposes only. We recommend seeking financial advice about your situation and goals before getting a financial product.

Investment and administration manager: ANZ New Zealand Investments Limited