The Turkish lira reached record low levels against the US dollar last month, as Donald Trump announced that he would be doubling metals tariffs on Turkey. At the start of the month, the lira had already fallen -22.5% versus the dollar since the start of the year, but it slumped a further -25% in August, reaching an all-time low of 0.1425 on 13th August. Turkish stocks also suffered as a result of the news, as an iShares MSCI Turkey ETF lost -13.3% in one day.
Meanwhile the Argentine peso has also collapsed against the dollar this year, and is down -49.5% as of the end of August. Argentina’s Central Bank has responded by increasing its base interest rate from an already massive 45% to 60%, which is currently the highest in the world.
With the Brexit deadline just seven months away, Brexit Secretary Dominic Raab has issued the first batch of documents which outline how businesses and citizens should react should Britain leave the EU in a ‘no deal’ scenario. Chancellor Phillip Hammond responded by warning that a ‘no deal’ Brexit would likely result in a 7.7% hit to the country’s GDP over the next fifteen years.
The S&P 500 index, which measures the performance of the largest US stocks, reached a new all-time high last month, and in doing so claimed its longest ever bull run – i.e. the longest run without a fall of 20% or more. From its low point of 676.53 in March 2009, the index has ended the month on 2,901.52 – a gain of +328.9%.
August was a mixed month for equity markets. In the UK, the FTSE 100 index lost -3.29%, while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index, slipped -0.90% and -0.89% respectively. In the US, the S&P 500 index gained +3.26%, while in Europe the Eurostoxx index fell -3.70%. The Topix index, which measures Japanese equities, declined -1.00%.
Emerging market returns were mostly negative, as the MSCI Emerging Markets index dropped -0.52%. Latin American equities, measured by the MSCI Latin America index, fell -2.19, and Chinese equities continued to struggle as the MSCI China index shed a further -3.77%. In India however, the IISL Nifty 50 PR index lifted +2.85%.
Fixed income returns were mixed. UK government bonds, measured by the FTSE Gilts All Stocks index, rose +0.16% and long dated (over 15 years to maturity) gilts moved +0.07%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, were flat on +0.03% while sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, picked up +0.50%. 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 returned -0.20% and +0.47% respectively.
In the commodities market, the S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, climbed +1.08%. Oil recovered slightly after a terrible July, as the price of a crude oil contract rose +1.51%. The precious metals continued to struggle though, with the S&P GSCI Gold and Silver indices falling -2.01% and -6.87% respectively. The agricultural markets also faltered as corn and wheat decreased -5.56% and -4.84% respectively.
In the FX market, the US dollar and the euro gained +1.25% and +0.51% respectively against the pound.
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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