October 25, 2016

Third Quarter Highlights

Financial Markets

  • There was a shift in leadership in equity markets away from the top performers of the first half, high dividend payers and defensive stocks, to higher growth and more cyclical stocks. Technology, small-capitalization (cap), and emerging markets stocks had the best returns.
  • Global bond yields traded in a narrow range from the low end of the range on safe haven trading to the higher end of the range when sentiment shifted about the likelihood of changes to the accommodative monetary policies of various central banks.
  • After significant gains in the second quarter, oil and commodity prices cooled in the third quarter.

Overview of the Economy

  • In the U.S., economic data continues to be mixed. Weaker than expected data reported in September on manufacturing and service activity, home sales, and retail sales brought back worries about recession and overshadowed good news on the job market and an upward revision to second quarter growth in gross domestic product (GDP).
  • China is showing some improvements in manufacturing activity, exports, and retail sales. There has been little change in economic data in Europe.

Notable Events

  • In a surprise move, the Organization of Petroleum Exporting Countries (OPEC) agreed to limit production. The agreement is only preliminary; it could change when OPEC meets in November to finalize implementation details.
  • Concerns flared about the health of European banks as negative interest rates, tepid borrowing, and the impact of regulatory actions are pressuring bank earnings and capital levels.

For an in depth analysis of the quarter, please download the PDF.