September 2022 Monthly Review

Jordi Visser

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2022 has been a difficult year for investors, with stocks and bonds having one of their worst years on record. After a summer rebound, September reminded investors that 2022 is not over. The S&P 500 (“SPX”) had its second-worst month in the last 10 years, only surpassed by March of 2020 during the throes of the pandemic. The risk-off environment was driven by the CPI release on September 13th, which led the market to build in more Fed rate hikes. 2yr rates had their 2nd largest monthly basis point rise in the last 10 years. As 2yr TIPS inflation expectations have moved lower for the 6th month in a row, real 2yr yields continued their rapid rise. While real 2yr rates were down –2.61% to finish February, they closed September at +2.30% for a 491bps rise. Changes in 2yr rates have applied pressure to assets. As credit fears rose, the iShares iBoxx $ Inv Grade Corporate Bond ETF had its worst month since April. Notably, risk parity strategies had their worst month since 2020 as stocks, bonds, and inflation expectations all fell.

Typically, when we see risk assets fall, there is an aggressive move into safety, which is observed by comparing beta vs. quality and small caps vs. large caps. However, these factor rotations were muted after a strong summer. Additionally, the Goldman Sachs VIP Hedge Fund VIP Basket outperformed the SPX.  Due to the meaningful deleveraging, we will need to see something economically systemic to spur another deleveraging wave this year. We think the re-leveraging process will be starting soon.

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Important disclosures: Disclosures: This content (the "Insights Page") is provided by Weiss Multi-Strategy Advisers LLC ("Weiss"). The views expressed on the Insights Page are for informational purposes only and are subject to change without notice. Information on the Insights Page has been developed internally and is based on market conditions as of the date of the original post on the Insights Page from sources believed to be reliable. Nothing on the Insights Page should be construed as investment, legal, tax, or other advice and should not be viewed as a recommendation to buy or sell any security or adopt any investment strategy. Past performance is no guarantee of future results. Please consult your own advisers regarding business, legal, tax, or other matters concerning investments. Weiss has no control over information at any external site hyperlinked on the Insights Page. Weiss makes no representation concerning and is not responsible for the quality, content, nature, or reliability of any hyperlinked site and has included hyperlinks only as a convenience. The inclusion of any external hyperlink does not imply any endorsement or ongoing monitoring by Weiss of any hyperlinked site. Investing in securities is speculative and involves substantial risk of loss.