Views from the Investment Management Research Unit on how the investment markets have performed and the key economic issues making the headlines.
Non-Japanese Asian stocks led the way in August, providing investors with some of the best returns of the month. Developed market stocks and shares also had a good month, while bonds, commodities and interest-rate-sensitive investments all slipped slightly.
July was another positive month for investment markets, however the focus earlier in the year on the oil price and the quality and direction of Chinese growth was replaced by concerns closer to home such as Brexit, European Bank performance and the forthcoming US elections.
Despite a strong start to June for global and especially emerging markets, the decision by the British electorate to leave the EU increased market volatility in all regions. The political fallout and added uncertainty of the future relations between the UK and Europe have dampened growth predictions, weakened the pound and increased the risk of recession in the UK.
May saw a continuation of the increased risk appetite seen in April, with oil leading commodities higher and developed equity markets rising. However indications are that investors expect slow but resilient growth during the rest of the year.
April saw bond and equity market indices broadly holding on to their year-to-date levels as the oil price increased by about ten US Dollars a barrel and markets waited for the pronouncements of central bank meetings at the end of the month.
Fears over global growth, a Chinese ‘hard landing’ and the fall in the oil price in January and February eased in March, as more stimulus from the European Central Bank and dovish noises from the Fed helped to restore some composure to markets.
Market declines continued until mid-February, followed by a significant rebound towards the end of the month as investor confidence improved. However, sentiment remains fragile, with investors continuing to worry about the uncertain outlook for global economic growth, commodity prices and central bank policies.
Volatility returned to markets in January with one of the worst starts to a calendar year on record. Against a backdrop of Chinese growth fears and an oversupply of oil, central banks pushed out their forecasts for rate rises, the Yen strengthened sharply and safe haven government bonds returned to favour. The US energy sector bore the brunt of credit market falls.