Global markets were fairly volatile during the month as participants speculated over whether the Federal Reserve would increase interest rates. The eventual announcement from the Fed was that they would keep interest rates on hold, although they indicated that there may be a rate rise before the end of the year. The benchmark interest rate has remained at 0.5% in the US since last December, when they rose from a historic low of 0.25%.
In the UK, Jeremy Corbyn fought off competition from Owen Smith in the Labour leadership contest with 61.8% of the vote and maintained his status as Leader of the Labour party. Meanwhile, former Conservative supporter Diane James was elected the new leader of UKIP, succeeding Nigel Farage, but she stood down eighteen days later after admitting she didn’t have ‘sufficient authority’ for the role. Former Prime Minister David Cameron also resigned from his role as Conservative MP of Witney, claiming he did not want to become a distraction from the work of the new government.
In the US, the first televised presidential debate between candidates Donald Trump and Hillary Clinton was watched by a record 84 million viewers, surpassing the 80.6 million that watched Ronald Reagan take on Jimmy Carter in 1980. At the time of writing, Clinton is marginally ahead of Trump in most official polls. The election takes place next month.
September was a mixed month for developed equity markets. In the UK, the FTSE 100 index climbed +1.80% while the FTSE 250 (ex IT) index and the FTSE Small Cap (ex IT) index grew +1.03% and +1.34% respectively. In the US, the S&P 500 index stayed flat at +0.02% while in Europe the Eurostoxx 50 index dipped -0.56%. Japanese equities, measured by the Topix index, gathered +0.34%.
Emerging market returns were also mixed. The MSCI EM (Emerging Markets) index saw an increase of +0.47%. Chinese equities, represented by the MSCI China index, gained +2.54% while Latin American equities, measured by the MSCI EM Latin America GR index, slipped -0.21%. The IISL Nifty index, which measures Indian equity returns, fell -1.99%.
Global bond markets mostly had a negative month. UK government bonds, measured by the FTSE Gilts All Stocks index, dropped -2.29% while long dated (over 15 years to maturity) gilts shed -4.68%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, fell -0.12% and sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, lost -1.59%. High yield returns were also negative, as the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index depreciated by -0.49% and -0.15% respectively. Emerging Market sovereign debt, measured by the JP Morgan EMBI Global index, improved by +0.34%.
Commodities had a more positive month. The S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, increased +4.14%. Oil performed strongly, as the Brent Oil Price Brent Crude PR index jumped +4.29%. The precious metals also saw positive returns, as the S&P GSCI Gold and Silver indices rose +0.46% and +2.74% respectively. The agricultural markets finally gained some traction after months of negative returns, as corn and wheat grew +6.74% and +3.54% respectively.
In the foreign exchange markets, it was another weak month for the pound. The US dollar, the euro and the yen all appreciated against the pound by +0.82%, +1.73% and +2.98% respectively.
James Timpson CFA, BSc (Hons), IMC
(All the above returns are reflected on a local currency basis i.e. they do not factor in any relevant currency movements. Unless accompanied by PR (Price Return), they do include income).
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