Performance across global equity markets was mixed in August, and as a result, the benefits of our very diversified approach came to the fore. Japanese Equities led the way, with a strong return of +4.8% for the month as measured by the MSCI Japan Index. This contrasted with negative returns from Emerging Market Equities as measured by the MSCI Emerging Markets Index (-0.6%) and from the US Equity market as measured by the S&P 500 Index (-0.1%). UK and Continental European markets were positive, and from a style perspective cheaper value stocks broadly outperformed more expensive growth stocks.
As we have noted in recent updates, the principal dynamic driving markets at the moment remains the balancing act faced by the US Federal Reserve, as well as other central banks such as the Bank of England. This balance involves whether banks are capable of providing interest rate cuts to the sectors of the economy which are struggling while at the same time the impact of tariffs clouds the picture on inflation. In his remarks at the Jackson Hole conference earlier in the month, Federal Reserve Chair Jerome Powell’s remarks fuelled hopes of near term relief for the economy and this lifted investor sentiment globally. However, from the perspective of a GBP investor, as you can see above, the gains made by the US stock market in local currency terms were more than offset by the weakening of the US Dollar vs the Pound Sterling. Given President Trump’s ongoing crusade to fire one of the Federal Reserve governors and the fact the month ended with the Shanghai Cooperation Organisation (SCO) summit in Tianjin which saw China and Russia promoting a multipolar global order that challenges the US-centric international system – it is reasonable to conclude that ongoing weakness in the US Dollar might be here to stay. This highlights the advantage of a global diversified portfolio which can benefit from these developments.
All performance figures are stated in Sterling terms, unless otherwise specified.
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