Over the month we saw a very solid global equity market performance and refreshingly muted short-term fixed income performance as Brexit growth fears subside, albeit with little direction from UK and European policy makers at this time. It is widely anticipated to be a topic for discussion by world leaders at the next G20 Summit in Hangzhou, Zhejiang.
Over the month, the FTSE World returned 1.57% in GBP terms, which was primarily supported by strong performance in Europe as the FTSE 100 rose 1.67% Germany and Spain returned 2.47% and 2.77%, with Italy and France lagging with 0.83% and -0.04% respectively. Japan, Asia and Emerging Markets were all strong over the month with 1.99%, 3.40% and 1.85% and China returned a very plaudible 3.56%.
Oil saw a very strong rally over the month with a 10.79% return from a low base, while gold retreated slightly with a -1.35% return.
Fixed income markets were pleasingly muted in such a strong equity month, UK 1-3 year gilts retracted -0.06%, while 1-5 year gilts returned 0.04% and 7-10 returned 1.01%. As has been the case throughout the year, longer dated gilts returned 5.57% which indicates market concerns on longer term growth and interest rates, while longer dated corporate fixed income returned 6.05%. There was clear outperformance by corporates over gilts in all maturities.
Figure 1: Chicago Board Options Exchange Volatility Index (VIX) – 1 August 2016 to 31 August 2016
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