August Market Commentary

August Market Commentary by Luna Investment Management – A Thornbridge Appointed Representative

The Bank of England cut interest rates to 4% early in the month. This was despite the fact that they admitted inflation was likely to remain ‘sticky’ and approach 4%, well above their 2% target. The inflation figure was announced after the Bank of England decision and showed it had accelerated to 3.8% in July, above expectations. In addition, concerns about how the government also balance the budget in October, are also starting to weigh on UK government bonds and they delivered a negative return during the month.

Equity markets had a relatively muted month in August in what is seasonally a quieter period. A number of major stock markets went on to hit fresh all-time highs with the Japanese Nikkei 225 leading the way in the month, up nearly 4.5%. In the US, markets were a lower with a weaker US dollar, weighing on returns. In addition, Nvidia’s quarterly earnings were released, which beat overall sales and earnings estimates, however, missed on their data centre revenue forecasts and hence were flat over the month.

The most market-moving economic news was the release of US non-farm payrolls for July, which suggested the US labour market was slowing. Following July’s weaker non-farm payrolls report, President Trump fired the head of the Bureau of Labour Statistics. Later in the month, central bank independence came into the spotlight again as the President attempted to fire Lisa Cook, one of seven members of the Fed’s Board of Governors.

Across the channel, French Prime Minister François Bayrou called a shock decision to submit his government to a vote of confidence in parliament. With the chances of him winning the vote in a special session of the National Assembly on September 8 being extremely slim, the prime minister’s days in office look numbered. If the vote is lost, Bayrou will be expected to resign, leaving France once again rudderless at a time of immense economic, social and geopolitical uncertainty.

– Luna