Rising concerns about the longevity of central bank accommodation briefly broke the tenuous calm in markets. The ECB’s inaction, the Fed’s indication of a potential rate increase later this year and the BOJ’s “comprehensive review” injected anxiety and volatility into relatively calm markets as investors grew concerned that seemingly perpetual central bank support may not be quite so permanent.
The fundamental backdrop continued to point to muted growth as central banks held the spotlight. Data in the U.S. were softer relative to expectations while business and consumption indicators in the U.K. and the eurozone continued to be positive.
Markets stumbled early in the month before recovering. Volatility rose in early September alongside rising yields amid investor concern about a change in the dovish stance of central banks. Yields came back down and risk assets recovered as the Fed once again lowered its estimate of the long-term neutral rate and the BOJ reaffirmed its commitment to easy policy.