From our latest Investment Newsletter…
Volatility increased across asset classes in the third quarter of 2015. China’s economy, weak global commodity prices, and anxiety around if, and when, the Federal Reserve will raise interest rates weighed on investors’ minds. This anxious sentiment was matched by weak, global investment returns across equity markets.
Fears around China’s economic health grew. In August, China devalued its currency peg against the U.S. Dollar by approximately 4%, triggering a wave of concerns surrounding China’s economic growth and stoking fears of a currency war. Chinese equity markets dropped further while capital outflows intensified, forcing the Chinese to sell foreign exchange reserves to preserve the yuan’s lower peg against the U.S. Dollar. In August, for example, China sold just under $100 billion of its nearly $4 trillion in foreign exchange reserves due to this pressure. Some worried that this would have a negative impact on the U.S. Dollar and U.S. Treasury prices.
Read our full account of the quarter here.