September has been another eventful month in politics, on both sides of the Atlantic. Here in the UK, the Supreme Court ruled that Boris Johnson’s decision to shut down parliament was unlawful, while over in the US, Nancy Pelosi, the Speaker of the House of Representatives, announced a formal impeachment enquiry against Donald Trump. Financial markets have at least had a more stable month after the major wobble in August, with the MSCI World index posting a gain of +2.39%.
One company which didn’t have a stable month is Thomas Cook. Since the start of the year, Thomas Cook Group’s share price had collapsed -88.8%, before the company entered liquidation last week and its shares were delisted from the London Stock Exchange. The collapse has led to the largest ever peace-time repatriation in Britain, with 150,000 holiday-goers being chartered back to the country.
The US Federal Reserve has cut its benchmark interest twice in the last three months. Last December the benchmark rate was increased to an eleven year high of 2.25% - 2.5%, but with the two recent cuts the rate now stands at 1.75% - 2%. The two cuts in quick succession are indicative of a slowing economy. By lowering rates, the Fed are making it cheaper to borrow money, which in turn motivates consumers to spend and businesses to invest, both of which can help to spur on the economy.
A full round-up of September market performance.
In the UK, the FTSE 100 index increased +2.97%, while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index, picked up +3.68% and +2.88% respectively. In the US, the S&P 500 index gained +1.87%, while in Europe the Eurostoxx 50 index climbed +4.29%. Japanese stocks measured by the Topix index surged +6.04%.
Emerging market returns were also mostly positive. The MSCI Emerging Markets index put on +1.50%. Chinese equities measured by the MSCI China index had a flat month while Latin American equities, measured by the MSCI Latin America index, rose +2.95%. Indian stocks measured by the IISL Nifty 50 PR index lifted +4.09%.
In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, rose
+0.51% and long dated (over 15 years to maturity) gilts gained +0.95%. European corporate bonds, measured by the Markit iBoxx Euro Corporates index, dropped -0.81% while sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, moved +0.02%. In the high yield market, the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index captured -0.21% and +0.87% respectively.
Commodities had a mixed month. The S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, returned +1.75%. The price of a crude oil futures contract declined 1.87%. In the agricultural markets corn and wheat rallied +4.94% and +7.19% respectively. The precious metals had a turbulent month as the S&P GSCI Gold and Silver indices slumped -3.53% and -7.17% respectively.
In the currency markets, the pound appreciated against most major currencies, including the US dollar (+1.09%), the euro (+1.87%) and the yen (+2.74%).
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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