Global weekly: Wrapping up the third quarter

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Despite sharp price movements in specific stocks and bonds – Glencore being a striking example – broader equity and bond markets did not change much this week. Many investors probably welcomed the end of the third quarter, as it has been the worst period for equity performance since 2011. On a brighter note, we expect equity markets to recover in the fourth quarter.

In the past few months, stocks have been buffeted by concerns about China, uncertainty around US interest rates and the slump in commodity prices. More recently, company-specific risk related to the diesel scandal at Volkswagen and worries about the impact of low commodity prices on Glencore have hurt market sentiment.

However, it’s not all doom and gloom. The long-term drivers supporting stocks, including ample liquidity, decent earnings (in particular for European companies) and a global recovery led by the US and Europe, continue to support the asset class. And, after the recent market correction, valuations are reasonable. We believe the fourth quarter should see repair in equity markets, as they recover from and recoup recent losses.

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