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LCP Investment Summary - September 2022
Posted on 5 October, 2022 by Administrator
Volatile market conditions resulted in equity markets falling sharply by 7.1% (in € terms) in September. The US dollar continued to strengthen against the Euro, providing some protection against the large loses experienced by Euro investors. Higher than expected inflation expectations, government budget announcements and rising interest rates were key drivers of negative returns and difficult market conditions which challenged investors. Recession risk has remained a key headline as central banks grapple with difficult decisions between trying to tame inflation while limiting the impact on growth.
Governments released plans for support packages to curb high energy bills for consumers along with additional measures to aid the increased living costs. However, fear continued to build with concerns that these measures will not be enough to combat the energy crisis which continued to escalate over the month.
Long-dated core Eurozone bond prices fell 8.5% over the month, with the yield on the AAA Eurozone 15+ Year Index rising by 0.5% to 2.2% by month-end. Prices fell by 7.1% on the Euro Broad Sovereign 10+ Year Index, with its yield rising by 0.5% to 3.1% by the end of September.
Bond markets faced turbulent conditions following the announcement of the UK’s “mini-budget” which resulted in the Bank of England (BoE) having to step in to stabilise the market by implementing a time limited bond-buying programme. Eurozone inflation continued to persist at elevated levels, recording a new record level of 10% over September. The European Central Bank (ECB) raised base rates to 0.75% p.a. with further increases expected at the next ECB meeting in October.
Sample DC Schemes
Our three sample DC Strategies all fell as most asset classes were negative for the month.