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Signs of moderation in global economic growth that appeared during the summer months were confirmed with the publication of third-quarter growth figures, write Guy Wagner and his team in their latest monthly market report "Highlights".

In the United States, real GDP grew by 2.0% (quarter-on-quarter, annualised) between July and September compared with 6.7% between April and June. In the eurozone, most countries are still enjoying a strong phase of economic recovery, which explains the higher GDP growth of 2.2% (quarter-on-quarter, non-annualised) over the area as a whole in the third quarter. In China, GDP growth decelerated to 4.9% year-on-year due to a slowdown in real estate activity following the financial difficulties of the property developer Evergrande China, a resurgence of Covid-19 infections, and a power shortage. In Japan, supply difficulties in the automotive sector and the slowdown in Chinese demand began to show an adverse effect on exports in September. “The rising cost of living following the spike in inflation, ongoing supply chain problems, and a possible resurgence of Covid-19 infections as winter approaches are the main uncertainties looming over the outlook for global economic growth in the fourth quarter,” says Guy Wagner, Chief Investment Officer and managing director of the asset management company BLI - Banque de Luxembourg Investments.

Inflation rates remain at high levels

Inflation rates remain at high levels. In the United States, the Federal Reserve’s preferred inflation indicator, the PCE (personal consumption expenditures) deflator excluding energy and food, was unchanged at 3.6%, its highest level since December 1991. In the eurozone, inflation is still on a rising trend. In October, the headline inflation rate rose to 4.1%, the highest since 13 years.

Uncertainties over future ECB government bond purchases

Government bond yields rose slightly in October, “reflecting investors' doubts about the transitory nature of current inflationary pressures,” underlines the Luxembourgish economist. “In the eurozone, yield spreads between core and peripheral countries widened slightly, reflecting uncertainties over future ECB government bond purchases in the run-up to the likely end of the emergency pandemic purchase programme in March 2022.”

Consumer discretionary, technology, energy and financials performed best

After the correction in September, equity markets resumed their bullish trend in October. The weakness in September is characteristic of the consolidation that often happens in the autumn before share prices begin to rally at the end of the year. “It remains to be seen to what extent the persistent nature of current inflationary pressures could disrupt the equity markets’ traditional year-end flurry,” says Guy Wagner. “In terms of sectors, consumer discretionary, technology, energy and financials performed best, while less cyclical activities such as communication services and consumer staples recorded more modest gains.”

Guy Wagner, Chief Investment Officer

Originally from a family of entrepreneurs in Luxembourg and with a degree in Economics from the Université Libre of Brussels, Guy joined Banque de Luxembourg in 1986, where he was successively responsible for the Financial Analysis and Asset Management departments, then became Managing Director of BLI - Banque de Luxembourg Investments, an asset management company newly created in 2005.

From July 2022 on, he devotes himself exclusively to his role as Chief Investment Officer, to the management of the portfolios and to the management of the team in charge management of the various funds.

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