Good morning,


Government bonds were given a slight reprieve last week, as inflation (and associated indicators) dropped on both sides of the Atlantic. More details on the data below. The week started with Germany’s benchmark ten-year bund yield hitting its highest level since 2011. Italian yields were also under pressure, due to both the wider macro environment and concerns regarding the country’s own fiscal position – the ten-year yield hit its highest level in a decade on Thursday. However, much of this was reversed on Friday following the inflation release with the yield on both country’s respective ten-year bonds falling by double digits. Last week illustrates an important point around bond investing at this time. Many investors (including us here at Zurich) are more positive on the asset class than they have been for some time. However, it is always worth remembering that whilst the yield is now firmly in positive territory, capital value movements can still lead to losses within fixed income portfolios.


In relation to seasonality, it is interesting to note that the last four Septembers have now seen drops of just short of 5% or more. Additionally, there have been 11 third quarter falls for US stocks since 1990, and 9 of those times equities rebounded with strong fourth quarter gains. Do such statistics guarantee a strong end to 2023? Certainly not, but on balance it is more positive than negative.


As always, if you wish to discuss anything in further detail, please do get in touch.