The third quarter closed with widespread declines in financial assets, which continued their downward trend and reached 2022 lows. During this period, the positive correlation in the debt and capital markets that has prevailed for most of the year continued, making this an atypical year, with negative returns in both asset classes; this has only occurred in 1931, 1941, 1969 and 2018. Moreover, if the year ends at current levels, it would be the first time in history that the S&P500 and 10-year U.S. Treasury bonds have had losses of more than 10% in the same calendar year. Consequently, the September returns of a standard portfolio with exposure to 60% S&P500 and 40% Treasury-10 would accumulate a negative return of -21%, the worst since 1931.

Negative investor sentiment was driven by a new 75bp hike by the Federal Reserve, the third in a row of this magnitude. They also raised the outlook for further hikes for a longer period of time and significantly cut growth expectations for the U.S. economy from 1.7% to 0.2% by 2022.

Turning to the rest of the world, Russia "formally annexed" as sovereign territory four regions of eastern and southeastern Ukraine along with military advances by the Ukrainian army in those territories. The energy crisis continues across the European continent and a resolution to the conflict is unlikely in the short term. The U.K. central bank was forced to intervene in the U.K. debt markets due to interest rate movements caused by the new Prime Minister's economic program, which put the country's fiscal discipline and pension system at risk. Finally, on the Asian continent, China's zero tolerance policy on Covid-19 continued and new geopolitical tensions arose with North Korea's missile launches into the Sea of Japan.

At Grupo Inversión, we believe that high volatility will continue for the rest of the year, with inflation being the main variable to follow. Although inflation has begun to moderate, the world's central banks believe that there is still some way to go before changing their highly restrictive monetary policies.