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September 2020 - Market Update

| Market Commentary | By James Timpson

August was another positive month for global equity markets, The MSCI World index climbed a further +6.27%, making it the best August for global equities since 1986. The gains continue to be dominated by the US market, measured by the S&P 500 index, which has now gained more than 56% since the bottom of the market in March.

The strength of the US market is being driven by the big-name tech companies and the continued weakness of the dollar, which depreciated a further -2.12% against the pound during the month. Having surpassed $1.34 in the last few days, the pound is currently at its highest level against the dollar since 2018.

All eyes will likely remain on the US as we approach the presidential election. A glance at the latest exchange odds show that it’s currently very close between Trump and Biden, which could lead to some additional market volatility as the November election date draws closer.

A full round-up of August market performance

In the UK, the FTSE 100 index gained +1.75%, while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index, rose +5.86% and +4.16% respectively. In the US, the S&P 500 index surged a further +7.19%, while in Europe the Eurostoxx 50 index climbed +3.21%. Japanese stocks measured by the Topix index jumped +8.17%.

Emerging markets mostly performed well during the month, with the MSCI Emerging Markets index gaining +2.20%. Chinese stocks measured by the MSCI China index put on +5.45% and Indian stocks measured by the IISL Nifty 50 PR index increased +2.84%. However Latin American equities, measured by the MSCI Latin America index, declined -3.07%.

In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, dropped -3.06% and long dated (over 15 years to maturity) gilts shed -5.56%. European corporate bonds, measured by the Markit iBoxx Euro Corporates index, returned +0.16% while sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, slipped -0.78%. 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 improved +1.43% and +1.25% respectively.

Commodities had a positive month. The S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, rose +4.59%. The recovery in oil prices continued, with the price of a crude oil futures contract rising +5.20%. In the agricultural markets corn and wheat returned +9.98% and +2.27% respectively. The precious metals had mixed fortunes as the S&P GSCI Gold and Silver indices returned -0.36% and +17.15% respectively.

In the currency markets, it was a strong month for the pound as it appreciated +2.18% against the US dollar, +2.23% against the yen and +0.83% versus the euro.

James Timpson CFA, BSc (Hons), IMC

Analyst

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