6 Graphs that Explain Financial Markets in Q3

The third quarter of 2015 was an intense one for investors as China’s wild market gyrations continued and stock markets around the world fell. Here are six graphs that explain the key movements in financial markets during the past three months.

1. Stocks fell and bonds gained


US stocks fell by more than 7%, their worst quarter since the debt ceiling crisis in 2011. As is often the case when stocks go down, investment grade bonds rose. US stocks ended the quarter more than 10% below the peak they reached earlier in the year.

2. Defensive sectors outperformed


The so-called “defensive” sectors of the stock market, which often outperform other sectors when the overall market declines, did exactly that in the third quarter. The utilities sector shrugged off its struggles earlier in the year to be the only sector with a positive return, and the consumer staples sector was essentially flat. At the other end of the spectrum, energy and materials stocks were hammered by the fall in commodity prices.

3. Commodities’ declines continued


Commodities fell by almost 16% in the quarter, worse than every asset class except for emerging market stocks. This performance is a continuation of a longer-term trend. Commodities have generally moved downward since 2011 and have fallen by more than 10% in 3 out of the last 5 quarters.

4. Emerging markets suffered


Partly as a result of lower commodity prices, emerging market stocks lost almost 18% of their value. Brazil, which has a commodity-dependent economy and has faced a slew of other economic woes, saw its stocks lose almost one-third of their value. Chinese stocks also plunged as the country’s economy slowed and its stock market bubble continued to deflate.

5. Apple struggled amid China’s turmoil


Most US stocks weren’t dramatically affected by China’s market turmoil, but there were a few notable exceptions. Apple, the world’s largest company by market value, gets about a quarter of its revenue from China. While the stocks of many other large technology companies rose during the quarter, Apple lost more than 10% of its value.

6. The Fed kept interest rates at near-zero levels


The Federal Reserve decided to keep its benchmark interest rate at the near-zero level that’s prevailed since the financial crisis. Despite a continued decline in the unemployment rate (now 5.1%), low inflation and a weak global economy convinced the Fed not to raise rates at its September meeting. The Fed could still act later this year, although interest rates are unlikely to rise very far or very fast.