Trying to sift through the noise

Chief Investment Officer's team
02 October 2023
Trying to sift through the noise


  • Last week, September, and Q3 all ended with negative returns from major asset classes, except cash
  • Rising interest rates and energy prices are a threat to the global outlook…
  • … But recent and forthcoming data will help paint a clearer picture

Last week was another negative one, ending a negative month and the first negative quarter this year for all major asset classes. The weekend however brought positive news. First, the US Congress managed to avert a government shutdown, with a last minute, against-the-odds compromise providing funding until the 17th of November, while omitting to include additional aid for Ukraine, which was apparently needed to secure the vote. Second good news: China’s Caixin PMI numbers were released on Sunday. At 50.6 for the manufacturing gauge and 50.2 for services, levels are not astonishing, but they are both in expansion territory, which raises hopes for some stabilization there. China just started their golden week holiday, which means that mainland stock markets will be closed until next Monday.

Back to the big picture. Markets are taking the Fed’s “higher for longer” message seriously, while continuing to believe in a US soft-landing. Treasury yields are rising, the dollar is stronger, which, in combination with higher energy prices, means increased pressure on the global economy. Regional divergences are not to be ignored. However, while the outlook is not bright for Europe, the consequence is in an improvement on the inflation front. Signs of stabilization in China, if confirmed, could help Asia, even though it would also support demand for oil.

The year of unpredictability is not over, and markets are extremely nervous. We will focus on the most important fundamental factors: growth, and inflation. Regional PMIs on the one hand, US labor market data on the other will provide some insights this week. We will wait for those before taking any asset allocation decision. We still expect sustained volatility, as markets have recently confirmed their ability to turn quickly, and sharply.

Trying to sift through the noise

Cross-asset Update

Although the fourth quarter sees equities start on a positive note as a government shutdown is averted, multiple crosscurrents ahead suggest markets could have entered a more sideways phase. Global growth is still bifurcated between US exceptionalism and other major areas where activity rates remain underwhelming, notably Europe and the UK, while China is just stabilising. In itself positive growth is sufficient to keep equities afloat, yet at the same time financial conditions have tightened significantly, due to yields rising fast, a stronger US dollar and elevated crude prices. We do not see a turn for the better unless the growth impulse, for now confined to the United States, broadens out to include China, that means Beijing should go for bigger stimulus measures. Hence, for now we must live with the shortcomings of US exceptionalism, supporting the global economy, even as it brings about more tightening of liquidity. Against this backdrop, exposure within asset classes with a quality bias is more important than exposure to asset classes, as it seems that both yields and the US dollar can have further to rise.

The past week highlighted more of the same about global growth. The gap between hard and soft data remains wide in the United States, with core durable goods orders making new highs, personal expenditure steady, though the consumer confidence release let transpire angst about a future recession. In China positive surprises from retail sales and industrial production, alongside manufacturing confidence inching towards expansion territory, suggest that Beijing’s supportive measures are having the intended effects. That in turn may also indicate that the pain threshold for more drastic stimulus packages is high, so for now the trudging along continues in China and the growth impulse remains confined to the United States.

US exceptionalism is coming from fiscal dominance. Growth is resilient because government spending is going through the roof, rising at rates only seen during war times, that also has the darker side of increased debt issuance. Yields may rise further in the shorter term with no restraint in fiscal expenditure, a deficit in the crude market expected through Q4 further bolstering inflation expectations and reduced foreign buying of Treasuries due to prohibitive yield-hedging costs.

With both lights and shades dominating the outlook and a narrow growth impulse, investors may be tempted to add to their gold positions. We see gold struggling near-term, capped by tighter conditions driven by yields and the dollar. As focus shifts to peak rates when we are closer to the November FOMC meeting and at the same time investors question the sustainability of tight Fed policy, a relief rally can develop. We would see a more sustainable long-term bull market with the eventual implementation of yield-curve-control by the Fed to stave off unsustainably high borrowing costs with exploding US debt. But this would be a sort of end-game scenario for which there is now very limited visibility.

Trying to sift through the noise

Trying to sift through the noise

Trying to sift through the noise

Fixed Income Update

The US Treasury yield curve has bear steepened further. While the 20 September FOMC dot-plot revision was the catalyst, technical factors exacerbated the sell-off. The 10-year crossed the psychological 4.5% barrier last week and remains elevated at 4.61%. The 30-year trades around 4.73%. It was the largest quarterly jump for the 30-year yields in 30 years. We think the Fed is done with tightening. However, several technical factors should keep yields elevated. The ongoing QT, elevated treasury issuance and decrease in foreign central bank demand for Treasuries would force investors to ask for a high term premium that would put a floor on long-dated yields in the short term. We are neutral duration at the moment and prefer the belly of the curve for positioning. We would wait for weaker macro data before increasing our preference for the long-duration trade.

IG corporate credit outperformed both High Yield and Emerging Market Debt last week. Bloomberg Barclays Global credit index spreads widened by 3 bps compared to 9 bps and 7 bps of the HY and EM Debt indices. According to JP Morgan, redemptions among IG credit ETFs rose over the past week ($4.2bn, 2% of AUM), suggesting some caution among the most liquid investors. This is understandable given that IG bond total returns stood at -2.2% in September and that the recent sell-off in equity markets is likely dampening risk appetite.

S&P upgraded Oman from BB to BB+ with a stable outlook. Meanwhile, the rating agency affirmed Turkey's rating at B, but its outlook was improved from negative to stable. Considering an overheated economy, large twin deficits, elevated inflation, and rapid money growth, the stable outlook reflects balanced risks to Turkey's creditworthiness from the reimposition of orthodox monetary policy settings. In an effort to disinflate and de-dollarize the economy, the Central Bank, under new leadership, has raised the critical one-week repo rate by 21.5 percentage points since June to 30%. To offset fiscal deterioration, the Treasury has introduced indirect taxes. S&P believes that by 2026, absent renewed political uncertainty, the new team can rebalance Turkey's economy away from external debt-financed consumption and toward more balanced external and fiscal accounts, as well as more acceptable levels of inflation.

With three-quarters of the year over, GCC primary issuance has come out of the doldrums of 2022 and is slightly lower than the 2021 run rate. According to bond radar, YTD issuance above $54bn is higher by 67% over the full year 2022 issuance figure of $32.6bn. UAE issuers have contributed roughly one-third of the issuance. Financials from the UAE have led the bandwagon, contributing 42% to the total, followed by GREs, which amounted to 32% of the total issuance. The tilt to quality remains, with IG issuers selling 85% of the bonds this year. We have also seen an uptick in Sukuk issuance, with the figure crossing $6bn. A new development has been the issuance of AED-denominated bonds by the country's banks, which provides investors with another niche segment within Fixed Income.

Trying to sift through the noise

Trying to sift through the noise

Equity Update

A negative week, month and quarter for global equities, however still strong YTD gains, with most regions and sectors positive. At the end of Q3 developed markets are up 11% YTD, with the US leading returns and the Eurozone and Japan in USD terms just a little behind. In local currency Japan equities have had a great 3 quarters with the Nikkei up +24% YTD. US equity returns were boosted by AI driven sentiment gains of the big 7 tech companies. Whilst the tech sector fell c. 6% in September as higher yields impacted high growth sector performance, the Nasdaq is +27% YTD with Nvidia up almost 200%, Meta +150%, Tesla +100%, and on average the big 7 tech are +85%. In 2023 AI has been the greatest disrupter for stock markets. Also, a large difference between the current 36x forward PE for the Magnificent 7 tech stocks and 17x for the rest of the world. Emerging market equities at +1.8% YTD, have the Dubai Index in the lead, +31%, with India +8% in USD terms and China diametrically opposite at -7.3%.

September was not a good month for equity returns barring India, the UAE and the energy sector. In the last two months, US treasury bonds have suffered a steep sell-off, with 10-year yields rising to their highest since 2007, with the reality of “higher-for-longer” for corporates. With 10yr US real rates now 2%+ interest rates are an important determinant of performance. What’s relevant is that in the past 100 years the S&P 500 mean return was 8%. This includes all the sell offs and higher interest rate regimes. As per the latest Flowshow report from Bank of America the 21st century price to earnings equity multiple for the S&P 500 is an average of 19x, close to valuation levels currently, then equities are fine; but if new secular trends mean a lower multiple with higher rates that’s a worry. However, earnings have turned a corner (flat y/y for Q3 is good), net margins are in the 11.5% range and inflation ticking down, even with higher oil prices. We expect US markets to trade around current levels, with the Q3 earnings the next catalyst.

We are overweight the UAE and India and remain neutral EM Asia. The Dubai market continues to add to gains with the real estate sector rally continuing. No impact from higher interest rates as property sales are not mortgage driven. Plenty of luxury sales but end-user buying by professionals and successful off-plan launches continue. The service economy: hotels, airlines, education are above pre-pandemic levels.

India’s GDP growth 7.8% y/y in 2Q23 fundamentally supports Indian equities. Also, China’s economic struggles are benefiting Indian equities. However, India’s economy is sensitive to the price of oil. The long-awaited inclusion of Indian government debt in JP Morgan’s benchmark index for EM sovereign bonds should help lower yields and add to a monetary policy that is expected to turn accommodative if inflation stays in the India’s central bank 4-6% target.

China’s policy towards both the economy and markets has been more positive in September and recent economic data has beaten expectations. However, a sustained turnaround will require much better growth outcomes with Evergrande debt woes and real estate downturn bad for sentiment. What stands out is Chinas dominance in auto exports, both combustion and EV’s.

Trying to sift through the noise

Trying to sift through the noise

Trying to sift through the noise

Written by:


This document is prepared by Emirates NBD Bank (P.J.S.C) (“the Bank” or “Emirates NBD”), a public joint stock company incorporated in Dubai, UAE and licensed, regulated supervised and controlled by the Central Bank of the UAE (“Central Bank”) and the Securities and Commodities Authority of the UAE (“SCA”), having its head office at Baniyas Road, Deira, PO Box 777, Dubai, United Arab Emirates. This document may be distributed and/or made available by the Bank and its affiliates and subsidiaries, including Emirates NBD Capital KSA CJSC (“ENBD Capital”) (through its website, its branches or through any other modes, whether electronically or otherwise).

Emirates NBD and its affiliates, subsidiaries and group entities, including its shareholders, directors, officers, employees and agents are collectively referred to Emirates NBD Group.

This publication is prepared without regard to the individual financial circumstances and objectives of persons who receive it. Data/information provided in this publication are intended solely for illustrative purposes for the general information or its recipients, irrespective of their customer classification as an Ordinary Investor or Professional Investor under the SCA Regulations. 

Any person (hereinafter referred to as “you”, “your”) who has received this document or have access to this document shall acknowledge and agree to the following terms.


This publication may include data/information taken from stock exchanges or other third-party sources from around the world, which Emirates NBD reasonably believes to be reliable, fair and not misleading, but which have not been independently verified. The provision of certain data/information in this publication may be subject to the terms and conditions of other agreements to which Emirates NBD is a party. Opinions, estimates and expressions of judgment are those of the writer and are subject to change without notice. Emirates NBD or any member of Emirates NBD Group makes no representation or warranty and accepts no responsibility or liability for the sequence, accuracy, completeness or timeliness of the information or opinions contained in this publication. Nothing contained in this publication shall be construed as an assurance by Emirates NBD that you may rely upon or act on any information or data provided herein, without further independent verification of the same by you.

The contents of this document are prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors, including those relevant to the determination of whether a particular investment activity is advisable. Emirates NBD does not undertake any obligation to issue any further publications or update the contents of this document. Emirates NBD may also, at its sole discretion, update or change the contents herein without notice. Emirates NBD or any member of Emirates NBD Group does not accept any responsibility whatsoever for any loss or damage caused by any act or omission by you as a result of the information contained in this publication (including by negligence).

References to any financial instrument or investment product in this document are not intended to imply that an actual trading market exists for such instrument or product. Certain investment products mentioned in this document may not be eligible for sale in some jurisdictions, and they may not be suitable for all types of investors. The information and opinions contained in this publication is provided for informational purposes only and have not been prepared with any regard to the objectives, financial situation and particular needs of any specific person, wherever situated. If you wish to rely on or use the information contained in this publication, you should carefully consider whether any investment views and investment products mentioned herein are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You should also independently verify and check the accuracy, completeness, reliability and suitability of the information and should obtain independent and specific advice from appropriate professional advisers or experts.


This publication may be provided to you upon request (and not for distribution to the general public), on a confidential basis for informational purposes only, and is not intended for trading purposes or to be passed on or disclosed to any other person and/or to any jurisdiction that would render the distribution illegal.


None of the content in this publication constitutes a solicitation, offer, recommendation or opinion by Emirates NBD to buy, sell or trade in any security or to avail of any service in any jurisdiction. This document is not intended to serve as authoritative legal, tax, accounting, or investment advice regarding any security or investment, including the profitability or suitability thereof and further does not provide any fiduciary or financial advice. This document should also not be used in substitution for the exercise of the prospective investor’s judgment.

Third Party

This publication is not intended for use by, or distribution to, any person or entity in any jurisdiction or country where such use or distribution would be contrary to law or regulation. It is the responsibility of any person in possession of this publication to investigate and observe all applicable laws and regulations of the relevant jurisdiction. This publication may not be conveyed to or used by a third party without the express consent of Emirates NBD or its affiliates, subsidiaries or group entities distributing this document. You should not use the data in this publication in any way to improve the quality of any data sold or contributed by you to any third party.


Notwithstanding anything to the contrary set forth herein, Emirates NBD, its suppliers, agents, directors, officers, employees, representatives, successors, assigns, affiliates or subsidiaries shall not, directly or indirectly, be liable, in any way, to you or any other person for any: (a) inaccuracies or errors in or omissions from this publication including, but not limited to, quotes and financial data; or (b) loss or damage arising from the use of this publication, including, but not limited to any investment decision occasioned thereby. Under no circumstances, including but not limited to negligence, shall Emirates NBD, its suppliers, agents, directors, officers, employees, representatives, successors, assigns, affiliates or subsidiaries be liable to you for direct, indirect, incidental, consequential, special, punitive, or exemplary damages even if Emirates NBD has been advised specifically of the possibility of such damages, arising from the use of this publication, including but not limited to, loss of revenue, opportunity, or anticipated profits or lost business.

This publication does not provide individually tailored investment advice and is prepared without regard to the individual financial circumstances and objectives of person who receive it. The appropriateness of an investment activity or strategy will depend on the person’s individual circumstances and objectives and these activities may not be suitable for all persons. In addition, before entering into any transaction, prospective investors should: (i) ensure that they fully understand the potential risks and rewards of that transaction; (ii) determine independently whether that transaction is appropriate given an investor’s investment objectives, experience, financial and operational resources, and other relevant circumstances; (iii) understand that any rates of tax and zakat or any relief in relation thereto, as may be referred to in this publication may be subject to change over time; (iv) consult their advisers on the legal, regulatory, tax, business, investment, financial and accounting implications of the investment; (v) understand the nature of the investment and the related contract (and contractual relationship) including, without limitation, the nature and extent of their exposure to risk; and (vi) understand any regulatory requirements and restrictions applicable to the prospective investor.

Forward Looking

Past performance is not necessarily a guide to future performance and should not be seen as an indication of future performance of any investment activity. The information contained in this publication does not purport to contain all matters relevant to any particular investment or financial instrument and all statements as to future matters are not guaranteed to be accurate. Certain matters in this publication about the future performance of Emirates NBD or members of its group (the Group), including without limitation, future revenues, earnings, strategies, prospects and all other statements that are not purely historical, constitute “forward-looking statements”. Such forward-looking statements are based on current expectations or beliefs, as well as assumptions about future events, made from information currently available. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “seek”, “believe”, “will”, “may”, “should”, “would”, “could” or other words of similar meaning. Reliance should not be placed on any such statements in making an investment decision, as forward-looking statements, by their nature, are subject to known and unknown risks and uncertainties that could cause actual results, as well as the Group’s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Estimates of future performance are based on assumptions that may not be realized.


Data included in this publication may rely on models that do not reflect or take into account all potentially significant factors such as market risk, liquidity risk, and credit risk. Emirates NBD may use different models, make valuation adjustments, or use different methodologies when determining prices at which Emirates NBD is willing to trade financial instruments and/or when valuing its own inventory positions for its books and records. The use of this publication is at the sole risk of the investor and this publication, and anything contained herein, is provided "as is" and "as available." Emirates NBD makes no warranty of any kind, express or implied, as to this publication, including, but not limited to, merchantability, non-infringement, title, or fitness for a particular purpose or use.

Investment in financial instruments involves risks and returns may vary. The value of investment products mentioned in this document may neither be capital protected nor guaranteed and the value of the investment product and the income derived therefrom can fall as well as rise and an investor may lose the principal amount invested. Investment products are subject to several risks factors, including without limitation, market risk, high volatility, credit and default risk, illiquidity, currency risk and interest rate risk. It should be noted that the value, price or income of securities denominated in a foreign currency may be adversely affected by changes in the currency rates. It may be difficult for the investor to sell or realise the security and to obtain reliable information about its value or the extent of the risks to which it is exposed. Furthermore, the investor will not have the right to cancel a subscription for securities once such subscription has been made. Prospective investors are hereby informed that the applicable regulations in certain jurisdictions may place certain restrictions on secondary market activities with respect to securities.

Before making an investment, investors should consult their advisers on the legal, regulatory, tax, business, investment, financial and accounting implications of the investment. In receiving this publication, the investor acknowledges it is fully aware that there are risks associated with investment activities. Moreover, the responsibility to obtain and carefully read and understand the content of documents relating to any investment activity described in this publication and to seek separate, independent financial advice if required to assess whether a particular investment activity described herein is suitable, lies exclusively with the investor.

Intellectual property

This publication has been developed, compiled, prepared, revised, selected, and arranged by Emirates NBD and others (including certain other information sources) through the application of methods and standards of judgment developed and applied through the expenditure of substantial time, effort, and money and constitutes valuable intellectual property of Emirates NBD and such others. All present and future rights in and to trade secrets, patents, copyrights, trademarks, service marks, know-how, and other proprietary rights of any type under the laws of any governmental authority, domestic or foreign, shall, as between the investor and Emirates NBD, at all times be and remain the sole and exclusive property of Emirates NBD and/or other lawful parties.

Except as specifically permitted in writing, you should not copy or make any use of the content of this publication or any portion thereof or publish, circulate, reproduce, distribute or offer this publication for sale in whole or in part to any other person over any medium including but not limited to over-the-air television or radio broadcast, a computer network or hyperlink framing on the internet or construct a database of any kind. Except as specifically permitted in writing, you shall not use the intellectual property rights connected with this publication, or the names of any individual participant in, or contributor to, the content of this publication, or any variations or derivatives thereof, for any purpose. This publication is intended solely for non-commercial use and benefit, and not for resale or other transfer or disposition to, or use by or for the benefit of, any other person or entity. By accepting this publication, you agree not to use, transfer, distribute, copy, reproduce, publish, display, modify, create, or dispose of any information contained in this publication in any manner that could compete with the business interests of Emirates NBD. Furthermore, you should not use any of the trademarks, trade names, service marks, copyrights, or logos of Emirates NBD or its subsidiaries in any manner which creates the impression that such items belong to or are associated with you, except as otherwise provided with Emirates NBD’s prior written consent. You shall have no ownership rights in and to any of such items.


This publication was prepared by Emirates NBD Bank (P.J.S.C) in the United Arab Emirates. It has been issued and approved for distribution to clients by the London branch of Emirates NBD Bank (P.J.S.C) which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority in the UK. Some investments and services are not available to clients of the London Branch. Any services provided by Emirates NBD Bank (P.J.S.C) outside the UK will not be regulated by the FCA and you will not receive all the protections afforded to retail customers under the FCA regime, such as the Financial Ombudsman Service and the Financial Services Compensation Scheme. Changes in foreign exchange rates may affect any of the returns or income set out within this publication.


This publication was prepared by Emirates NBD Bank (P.J.S.C) in the United Arab Emirates. It has been issued and approved for distribution to clients by the Singapore branch of Emirates NBD Bank (P.J.S.C) which is licensed by the Monetary Authority of Singapore (MAS) and subject to applicable laws (including the Financial Advisers Act (FAA) and the Securities and Futures Act (SFA). Any services provided by Emirates NBD Bank (P.J.S.C) outside Singapore will not be regulated by the MAS or subject to the provisions of the FAA and/or SFA, and you will not receive all the protections afforded to retail customers under the FAA and/or SFA. Changes in foreign exchange rates may affect any of the returns or income set out within this publication. Please contact your Relationship Manager for further details or for clarification of the contents, where appropriate. For contact information, please visit


Emirates NBD Capital KSA CJSC (“ENBD Capital”), whose registered office is at P.O. Box 341777, Riyadh 11333, Kingdom of Saudi Arabia, is a Saudi closed joint stock company licensed by the Saudi Arabian Capital Market Authority (“CMA”) under License number 37-07086 dated 29/08/2007G (corresponding to 16/08/1428H) to deliver a full range of quality investment products and related support services to individuals and institutions in the Kingdom of Saudi Arabia. ENBD Capital is subject to Capital Market Law, and Implementing Regulations in the Kingdom of Saudi Arabia

 ENBD Capital’s contact details are T +966 (11) 299 3900 and F +966 (11) 299 3955.

This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Investment Funds Regulations issued by the Capital Market Authority.

The Capital Market Authority does not make any representation as to the accuracy or completeness of this document, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective subscribers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities offered. If you do not understand the contents of this document, you should consult an authorised financial adviser.