4 Graphs that Explain Financial Markets in Q3

Despite political turmoil in a number of countries, a tumultuous US presidential election campaign, and uncertainty in the aftermath of the “Brexit” vote in June, most asset classes posted positive returns in the third quarter. Stock markets around the world rose while high yield bonds continued their strong performance so far this year. Here are 4 graphs that explain the key movements in financial markets during the most recent quarter:

1. International stocks outperformed their US counterpartsIntl_Stocks.png

US stocks have substantially outperformed international stocks in recent years, but that wasn’t the case in the third quarter. US stocks rose, but stocks in both international developed markets and emerging markets performed even better as they bounced back from their declines around the time of Britain’s vote in June to leave the European Union.

2. Political risk affected a number of countries

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Though international stocks did well overall, markets in a few countries were adversely affected by political developments. The worst performing stock market in the third quarter was in the Philippines, where the presidential election was won by the volatile Rodrigo Duterte. Turkey, which experienced a failed coup attempt, and Mexico, which was hurt by investors’ fears of the possibility that Donald Trump will win the US presidential election, didn’t fare much better.

3. The technology sector surged

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The technology sector rebounded from being the worst-performing stock sector in the second quarter to being the best-performing stock sector in the third quarter. The sector’s performance was powered by the largest technology companies as Apple (+18.9%), Google (+14.3%), Microsoft (+13.3%), and Facebook (+12.2%) all posted double-digit gains.

4. The US economy continued its modest growth

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Economic data suggested that the US economy continued to grow, but a weaker-than-expected August jobs report showed that the growth remains slow and uneven. As a result the Federal Reserve kept its benchmark interest rate unchanged, though there may still be a rate rise later this year.