Sep 29, 2023 - Economy

The best investments of Q3? Crude oil and cash.

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

Crude oil and super-safe, short-term cashlike investments were your best bets in the third quarter — while long-term bonds got beaten up pretty good.

The big picture: The story behind the numbers is the as-yet-unfinished battle between the Federal Reserve and inflation.

Context: A sharp uptick in crude oil prices over the last few months — driven by production cutbacks by OPEC+ pals Saudi Arabia and Russia — has reinvigorated inflation pressures.

  • It's also rewarded investors who bet on rising oil prices.
  • The S&P 500 energy sector was up about 14% in Q3, the only industry component of the benchmark index that saw a gain.
  • And the U.K.'s commodity-heavy FTSE-100 also fared decently.

Where it stands: Outside of energy, the pain in stocks was pretty broad-based — including a sharp downturn for both the tech-heavy Nasdaq and Russell 2000 index of small-cap stocks that tend to be sensitive to short-term expectations for the U.S. economy.

Yes, but: The weakness in Q3 doesn't spell disaster for full-year returns given how well the markets performed earlier this year.

  • The Nasdaq is still up 26% this year and the S&P 500 remains in positive territory, up 12%.
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