In August, the UK eased its covid restrictions further. This saw an increase in cases but significantly lower hospitalisations and deaths than previously, thanks to the success of the UK’s vaccination roll-out. Looking abroad, we can see that Europe continues to make strong progress on their vaccine roll-out efforts, with European countries now making up 8 of the top 15 most vaccinated populations, with most people having received at least 1 dose[i].
Data released in August showed that UK’s services and manufacturing sectors continue to grow, despite supply chain and labour issues. The positive impact of the reopening has been reflected in the strength of the FTSE 250 (discussed below). While Europe is behind the UK in terms of reopening, it has also seen continued growth in the services and manufacturing sector. Unemployment in the UK continued to fall, dropping to 4.7%, although still 0.9% away from the pre-covid levels, showing there’s still room for improvement.
Inflation has been a hot topic so far in 2021, even after it fell from 2.5% to 2.0% in June, and the Bank of England (BoE) has recently outlined their measures to control future inflation. Although recent inflation increases are thought to be transitory, the BoE will be keeping a close eye on future figures now further restrictions have been eased.
The strong data coming out of the US in August was reflected in their stock market performance, which saw the seventh straight month of positive returns, leaving the market at very near all-time highs. Manufacturing and service sectors have continued to grow, while inflationary pressures also continued to build. There were also 943,000 jobs added in July, bringing the US unemployment rate down to the lowest post-Covid figure of 5.4%.
Markets
August was a positive month for global share markets. The strength of UK economies reopening, coupled with the removal of all domestic restrictions, helped propel the FTSE-250 (+5.03%) in August. Japan (+3.14%), US (+2.90%), Emerging Markets (+2.42%), Europe (+1.98%), Asia ex-Japan (+1.90%) and FTSE-100 (+1.24%) all ended the month in positive territory.
The performance of investments in foreign currencies was boosted in our Plans due to the weakening of sterling against the euro, US dollar, and Japanese yen. We go into more detail on this below.
Currency
Sterling weakened against many of the major currencies this month amid renewed pessimism regarding the Delta variant and ongoing supply chain disruptions. This, combined with UK GDP falling short of economists’ expectations, led to a decline in sterling’s valuation, weakening against the US dollar (-1.08%), the Japanese yen (-0.81%), and the euro (-0.56%).
Investment type performance breakdown
Shares rose (+3.55%) with their performance being improved by the general fall in sterling. Expectations about accelerating inflation continued to support the property sector (+1.11%), but inflationary pressures left bonds sitting flat for the month.
Summary with Plan details
All our investment Plans performed positively in August. Plans with a higher allocation to shares, such as our Ambitious and Adventurous styles, performed particularly well. Plans that hold more bonds, such as our Cautious Investment Style, would have seen the growth in shares and property smoothed by the flat performance of bonds.
Our Investment Team continue to actively monitor the financial markets and their impact on your Plan, and as always, we are ready to act in your best interests to events as they unfold.
Past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
i. https://ourworldindata.org/covid-vaccinations
