In this month’s market commentary our Chief Investment Officer looks at what has been driving and affecting the markets during August.
 
August Summary:

  • Japanese Prime Minister stepped down causing some volatility to equities
  • US technology stocks continued to power the broader US equity markets
  • The S&P 500 hit all-time highs towards the end of the month
  • Global risk appetite has swung into the ascendancy in recent months
  • Gold has retreated from its high at the beginning of the month
     
    The main political news during the month was driven in both the US and Japan.
     
    Across the Atlantic, the US election was moving into full swing. President Trump will be running for re-election and it is now confirmed that he will be up against Democratic presidential nominee, Joe Biden. The election is due to take place on 3rd November – which means we are going to see and hear a lot of rhetoric over the next couple of months.
     
    The big political news towards the end of the month was Shinzo Abe stepping down last week as Japanese Prime Minister on health grounds. The Liberal Democratic Party is expected to hold its leadership election on the 14th September with votes cast by lawmakers of the national parliament and delegates from its local chapters.
     
    The decision has caused some volatility to Japanese equities with Prime Minister Abe being the longest-serving Japanese leader, which brought with it both stability and a desire to tackle long-rooted issues (through “Abenomics”).
     
    In investment markets, the trend of US technology stocks powering the broader US equity markets continued. The S&P 500 has been hitting fresh all-time highs towards the end of the month. The fortunes have now been shared globally and the FTSE 100 fell below the 6,000 level and very close to the level at the end of July.
     

    Source: Alpha Terminal (end August 2019 to end August 2020)

     
    Safe-haven assets have been in the ascendancy during 2020; Gold, Government Bonds and the US dollar have all performed well.
     
    However, global risk appetite has swung into the ascendancy in recent months and these safe havens assets have lost ground. To highlight this, the UK ten-year Government Bond yield ended July at 0.1% and has increased to 0.34% – as yields increase in bonds – prices fall. This relationship is more pronounced on longer-dated bonds and these subsequently saw greater price falls during the month.
     
    Gold had soared to a high early in the month but retreated from its high and continues to hover around the $2,000 mark.
     
    Chief Investment Officer

     

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