Insights

From risk aversion to risk appetite in October

October was characterised by risk asset growth, while risk-free assets were more challenged. According to MSCI ACWI, global equities gained 5.1% in October, stated in local currencies, or 4.2% in DKK. At sector level, the returns were positive for all sectors except Real Estate, Consumer Discretionary and Communications. The returns were highest for Energy and Industrials.

Broad-based losses in September – the first signs of systemic stress

Financial assets were dragged by broad-based losses in September, and both risk-free and risk assets were under fire. In September, financial markets also saw the first signs of stress of a more systemic nature. At end-September, Bank of England (BoE) intervened in the financial market, in response to strong market reactions to the publication of the so-called Mini-Budget ahead of the full Budget. A few days later, UK 30Y government bond yields rose by 1.5pp, and the GBP was down by just over 10% vs the USD

Risk appetite turned to risk aversion in August

In August, investor behaviour was characterised by risk appetite in the first half of the month, while renewed risk aversion dominated in the second half of the month. This development probably reflected a resumed uptrend in short-term U.S. government bond yields following a period of flatter yield trends in July. Towards the end of August, yield rises intensified against a backdrop of messages from both the Federal Reserve and the ECB reiterating the need for monetary tightening to curb inflation.

High returns on both risk-free and risk assets in July

Almost all financial asset classes delivered high returns in July in the wake of the interest rate declines in the U.S. and Europe, starting in mid-June and continuing into July. In the financial market, this was probably considered a reverse interest rate shock, which helped slightly ease the tightening of the financial environment predominant in 2022.