For the first time since the Fed fired its liquidity nuke on March 23 and unleashed unlimited QE as well as corporate bond purchases for the first time ever, sparking a record market rally, stocks dropped last month as September brought an end to the post-COVID rebound in financial markets, with the majority of core non-currency assets losing ground over the month.

Nevertheless, as Deutsche Bank's Jim Reid reports, in spite of the poor performance in September, Q3 overall was another decent quarter as economies continued to recover from their post-lockdown lows, and 28/38 core non-currency assets moved higher.

Metals were the place to be in Q3, with silver leading DB's asset sample thanks to a +27.6% return over the last 3 months, supported by strong demand for precious metals amidst large quantities of central bank stimulus. That move also leaves it as the strongest performer on a YTD basis as well, with a +30.2% advance since the start of the year. That said, it’s worth noting that silver’s outperformance over the quarter came in spite of a -17.4% fall in the month of September, making it the worst performer on a monthly basis in spite of being the top performer on a quarterly and YTD one.

In terms of FX movements, the most notable story of Q3 has been the Euro’s appreciation, having strengthened by +4.3% against the dollar, the currency’s best performance since Q2 2017. This movement has attracted the attention of ECB policymakers recently, not least as the Euro Area CPI reading for August showed price growth in negative territory, at -0.2%.

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Looking just at September rather than Q3 however, sovereign bonds were the top performer, making up the top 5 performing assets in the DB sample as investors moved into haven assets. BTPs were in first place (+2.0%), with gilts in second (+1.6%), while Treasuries (+0.2%) and bunds (+1.0%) similarly advanced. In FX, the big September movement has been with sterling, which is down -3.4% against the US dollar in its worst month for over a year, against the backdrop of heightened tensions with the EU and the publication of the UK’s Internal Market Bill.

Turning to equities, September has seen a pullback, with the exception of the Nikkei which has risen +0.7% in total return terms. European banks have been the worst equity performer this month, and are in fact the worst YTD performer overall in the DB sample, with the STOXX 600 Banks down -10.7% over the month, -12.1% over the quarter and -41.9% over the year. Even US equities lost ground in September, having been one of the strongerperformers this year, with the S&P 500 (-3.8%) and the NASDAQ (-5.1%) both losing ground.

Finally on other commodities, copper (+11.8%) was a top performer over the quarter, while gold (+5.9%) advanced strongly as well. Oil continued to struggle though, with a September slump that saw WTI (-5.6%) and Brent Crude (-9.6%) decline significantly over the month, which left their YTD performance at -34.1% and -38.0% respectively.

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Finally, a look at asset performance YTD shows a bimodal distribution led by precious metals, tech stocks, China and govvies, while most commodities, EMs, and financial continue to be crushed.

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