5 mins
Stock markets and the economy

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September 2023 - The Fed delivers a harsh reality check

The global stock markets fell in September after the latest meeting of the U.S. Federal Reserve (Fed), when officials said they would keep interest rates higher for longer.   

The announcement served as a reality check for the markets, which had been expecting rate cuts in the coming months. But the central banks in the developed countries are determined to curb inflation, which remains above their targets despite encouraging signs of improvement.

Variation vs
Variation vs
Interest rate in Canada (%)
Key rate
Key rate 5.00 0.00 0.75
Commodities ($ US)
Oil (WTI)
Oil (WTI) $91.71 12.3% 14.0%
Gold $1,878.60 -4.8% 3.7%
EUR/CAD 1.43 -2.6% -1.1%
JPY/CAD 0.01 -2.6% -12.6%
USD/CAD 1.35 -0.1% -0.2%

Sources: Bank of Canada, Fundata


-3.3% (S&P/TSX Composite 30-09-2023)

Canada’s stock market was not immune to the overall market’s September decline in response to central bank rhetoric. Moreover, inflation picked up slightly in August, even though the economy showed its first signs of slowing, with GDP contracting in the second quarter of 2023. The S&P/TSX Composite Index ended the month with a return of -3.3%. All sectors except energy recorded losses.

As for the bond market, the FTSE Canada Universe Bond Index ended the month with a return of -2.6%, its worst monthly performance since the start of the year. The main reason for the decline was the sharp rise in bond yields throughout the month, also in response to central bank rhetoric. 


-4.8% (S&P 500 30-09-2023 in CAD)

In the United States, long-term bond yields also rose sharply in September after the Fed’s comments led to a decline on the stock market. The S&P 500 Index ended the month with a return of -4.8% in U.S. and Canadian dollars alike. The information technology and consumer discretionary sectors detracted from the return the most. Only the energy sector posted gains, driven by higher oil prices.  


-4.0% (MSCI Europe 30-09-2023 in CAD)

In Europe, the situation was no different. The MSCI Europe Index ended the month with a return of -1.3% in local currencies. The Canadian dollar’s strength against the major European currencies (euro, pound sterling and Swiss franc) amplified the losses, such that the index returned -4.0% in Canadian dollars. The energy sector was the sole contributor to the return, while the consumer discretionary and consumer staples sectors detracted the most. 


-2.5% (MSCI AC Asia-Pacific 30-09-2023 in CAD)

The Asian market being no exception, it too recorded losses in September. The MSCI All Country Asia Pacific Index ended with a return of -1.2% in local currencies and -2.5% in Canadian dollars. Financials, energy and utilities were the main contributors to the return, whereas information technology and industrials subtracted the most. 


-2.6% (MSCI Emerging Markets 30-09-2023 in CAD)

The MSCI Emerging Markets Index ended the month with a return of -1.8% in local currencies and -2.6% in Canadian dollars. From the regional standpoint, China detracted from the return the most.  Problems in the country’s real estate sector and weakening global demand continued to weigh on its growth prospects and on investors’ confidence, even though the Chinese government announced stimulus measures during the summer. From the sector standpoint, only energy and utilities posted gains.  

Reading in progress:September 2023 - The Fed delivers a harsh reality check


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