Global stock markets continued to rise in August, boosted by a strong earnings season in the US and robust economic data.

The MSCI World index gained 2.4% in local currency terms, with growth and value stocks offering near-identical returns in contrast to the previous month when growth stocks significantly underperformed. In the UK, medium-sized companies outperformed their large-cap counterparts as the FTSE 250 rose nearly 5% while the FTSE 100 remained flat. This coincides with a boost in the UK services PMI (Purchasing Managers’ Index) which grew at its steepest pace since February amidst the hot weather.

Reports that Russia may ramp up the offensive against Ukraine led to spikes in commodity prices, in particular the precious metals and agricultural products, with silver, corn and wheat all seeing double-digit increases during the month. Meanwhile the Brent Crude oil price continued to fluctuate between $80 – $95 per barrel. Inflation in the UK picked up slightly with the CPI (Consumer Prices Index) rising to 2.9%, however gilt yields remained relatively flat month-on-month.

Full round-up of August market performance

In the UK, the FTSE 100 index gained 0.22% while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index respectively, rose 4.85% and 2.79%. In the US, the S&P 500 USD index amassed 2.72% while in Europe the Eurostoxx 50 EUR index picked up 1.04%. Japanese stocks measured by the Topix JPY index gathered 3.85%.

Emerging markets were also mostly positive as the MSCI Emerging Markets index climbed 1.88% in local currency terms. Korean stocks measured by the KOSPI index rose 3.51% and Latin American equities measured by the MSCI Latin America local currency index gained 0.02%. However Indian stocks measured by the Nifty 50 index dropped 1.24% and Chinese equities measured by the MSCI China CNY index slipped 0.45%.

In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, crept up 0.19% with long dated (over 15 years to maturity) gilts rising 0.07%. Sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, went up 0.55%. In the high yield market, the ICE Bank of America Sterling High Yield index decreased gathered 0.70%.

In the commodities market, the S&P GSCI USD index, which consists of a basket of commodities including oil, metals and agricultural items, jumped 6.08%. Brent crude oil futures picked up 1.29% during the month. In the precious metals markets, the S&P GSCI Gold and Silver indices rallied 9.47% and 14.99% in USD respectively, while in the agricultural markets corn and wheat futures surged 16.85% and 18.34% in USD respectively.

In currency markets, it was a mixed month for the pound as it appreciated 0.49% versus the US dollar and 2.00% against the yen but depreciated 0.28% versus the euro.

Transcript

Leo Hallam (Head of Marketing)

As we enter September, I sit with James Timpson, Head of Asset Management, to find out what’s been happening in markets and around the world throughout August. James, last time we met, I said July felt like it lasted a long time. Where’s August gone?

James Timpson (Head of Asset Management)

I suppose it has flown by. But as is often the case, was really quite a quiet month for markets.

No major shocks. Global stock markets continued to rise throughout the month. MSCI world index was up another 2.4%. It beasts by some robust economic data and some strong earnings reports in the US. All eyes these days tend to be on the likes of Nvidia. It’s now the biggest company in the world and that’s released another really strong earnings release during the month. So markets were pleased with that.

Leo Hallam

I’m guessing that markets were unwavered by ongoing global tension.

James Timpson

They certainly were last month. Certainly the last couple of days, the first few days of September, with conflict escalating yet again in the Middle East. We’ve seen another slight wobble in the market, particularly the bond market, actually, but certainly throughout August, markets continue to shrug off the ongoing tensions in the Middle East.

Leo Hallam

And how have the Courtiers funds been positioned through all this?

James Timpson

The Courtiers funds have continued to do really well, actually. So we always make the points that we like to diversify across lots of different geographies, lots of different sectors. Have the portfolios seen anything new in the last month? Yeah, we have actually added quite a few stocks in the last month.

One of the benefits of markets being fairly quiet is that it gives you more opportunity to actually look at and new prospects for the funds. And one of the stocks we’ve added to our global fund in the last month is Macy’s. This is a big US department store chain, which I’m sure lots of people will be familiar with.

So this has cropped up in our model, and it currently trades at a 40% discount to its peer group median. So that includes other big US department stores such as Kohl’s and Dillard’s. And so because of that, Macy’s is currently flagging as having a really good value score in our model. And you know, we like value characteristics.

Leo Hallam

Why might it be that much lower than its peers?

James Timpson

It just means that it’s trading a lot cheaper, despite facing all the same headwinds and tailwinds that its peers would face relative to its financials. It’s trading much cheaper, and that’s why it’s flags so high in our model. So we’ve added that to the Global Fund. And of course the Global Fund is also a component of the multi-asset funds as well.

Leo Hallam

So when you say a quiet month gives you an opportunity to find some good deals or words to that effect. Is that because you and the team are less busy, or is it because these opportunities stand out more in a quieter landscape?

James Timpson

Yeah, there’s certainly a lot less noise. When markets are quieter, you get fewer distractions, shall we say.

Although, funnily enough, you could argue that we’re less busy when markets are in turmoil because it’s when markets are in turmoil that you have to sort of sit back, trust that your positioning is going to get you through it and not make any knee jerk reactions. Certainly when the Covid crash happened back in 2020, I remember we spent most of that time looking at our existing holdings and making sure that they were able to withstand any further disruption than to the economic cycle.

Leo Hallam

There’s back to the old saying time in the market, not time in them.

James Timpson

It’s like when you buy insurance, you have to buy insurance before the catastrophe happens. You can’t buy it during the catastrophe because the price will go sky high. Absolutely. Having said that, obviously even during times of market crisis, there are also going to be opportunities then as well.

So you can be on the lookout for opportunities in quiet months and in busy months.

Leo Hallam

So to wrap up, you say the Courtiers funds have been doing really well. Can you give us some numbers?

James Timpson

It’s been a really strong year for the fund so far, despite all the tensions and concerns over the Middle East. So so far, year to date, the Growth Fund has returned 16.8%.

Balanced fund has returned 13.3% and the cautious fund has returned 9.8%. So it’s been a really strong year for multi-asset funds so far.

Leo Hallam

Well done to you and the team. Thank you. Thank you very much and thanks for your time. If you do have any questions, please contact your adviser or contact us through the website. Thanks.