Markets endured significant volatility in August amid worries about a US recession and the implications of a sharply strengthening Japanese yen. As the month progressed fears subsided, with some more supportive data and words from Chair of the Federal Reserve (Fed), Jerome Powell. Overall, multi-asset portfolios benefitted as the market broadened and investors diversified ahead of political uncertainty. Here our investment team highlights the latest market developments:
UK
- UK equites (FTSE All Share) rose (+1.3%) in August driven by positive economic growth forecasts from the Office for National Statistics.
- UK house prices have recovered following increased market confidence, according to Halifax. Average house prices in August were £292,505, the highest since August 2022.
- The S&P Global UK Composite Purchasing Managers’ Index (PMI), an indicator for business trends, increased to 53.8 in August, up from 52.8 in July, further in expansionary territory.
- Official data shows inflation increased to 2.2% in the 12 months to July 2024; the first time inflation has increased since December 2023.
- The government has scrapped plans for the ‘British ISA’ over concerns it would ‘complicate’ the market for UK savers, according to the Financial Times.
- On 27 August, the Prime Minister gave a speech from Downing Street about the need for the government to make “painful” decisions in the upcoming October Budget.
Global
- Global equities gained +1.1% in August but endured a significant bout of volatility amid worries about a US recession.
- The proximate cause of the volatility was the Bank of Japan’s surprise interest rate hike from 0.1% to 0.25%.
- 10% falls in the global stock market are not uncommon, occurring in 30 of the 52 calendar years prior to 2024.
- US job data sparked market volatility as unemployment increased to 4.3% in July 2024 and only 114,000 new jobs were created – far fewer than economists had anticipated.
- In the US, a July ISM manufacturing print came in well below expectation (46.8 vs 48.8).
- Nvidia reported earnings ahead of expectations but still fell on the news, capping a month of extreme volatility, the share price moving in a 30%+ range.
Fixed interest
- Global bonds (Bloomberg Global Aggregate GBP Hedged) had a positive month (+0.7%) and were negatively correlated when equities sold off.
- US Treasuries outperformed (+0.8%) other markets as investors now expect the Fed to cut rates more aggressively than other key central banks.
- Japanese government bonds rallied as demand increased from domestic investors following the unwinding of the carry trade at the beginning of August.
- Global credit markets performed well as stable corporate earnings continue to support the asset class, while high yield lagged.
Other
- Gold continued to rise and hit fresh highs in US dollar terms.
- All major currencies – including EUR, GBP, CHF and JPY – continued to strengthen against the USD over the month.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
