August 2020 saw increases across all major stock markets as economic growth continued to recover thanks to the policy response from governments and central banks. This support, with more promised if necessary, has cushioned the economy and markets from the full impact of Covid-19. However, the current level of maintained policy support has raised inflationary concerns, which has slightly lifted major government bond yields.
Current data points to the global rebound continuing. While August’s data has shown that the expansion in the Eurozone is more moderate than July's figures, there was further acceleration in the United Kingdom, the United States, and Emerging Markets, led by China. Unemployment in the UK and Europe has seen little change as a result of governmental schemes providing support for businesses to retain workers. The US has seen a firm turnaround in employment, with just under half the jobs lost between February and April now recovered.
The development of a vaccine is still of critical importance to the market. However, government responses seem likely to focus on localised shutdowns, which will have less impact on the national economy than the initial national lockdowns experienced in most countries. Beyond Covid, Brexit negotiations continue to stall, weighing on investor appetite for UK assets. There’s also November’s US election, which we cover in-depth in our blog post, a quick guide to the 2020 US election.
In August, all global stock markets rose, with technology stocks having a particularly good month. We saw US equities gain strongly (+7.19%), while stronger than expected corporate earnings saw Japan bounce back from a dip in July (6.64%). Europe (3.21%), Asia Pacific excluding Japan (+3.84%), Emerging Market stocks (+2.24%) and the UK’s FTSE-100 (1.74%) also all improved.
An improvement in investor’s risk appetite managed to offset much of the concern surrounding the continued fruitless Brexit talks. As a result, August saw the British pound rise against the three major currencies. It gained the least against the euro (+0.82%), performing stronger against the US dollar (+2.13%) and the Japanese yen (+2.21%).
Investment type performance breakdown
August has seen some optimism returning to the market, coupled with some concern around inflation. This meant within our investment types bonds fell (-0.58%) while shares (3.47%) and property (1.89%) rose.
Summary with Plan details
The August performance of Wealthify Plans was mixed, depending on customer’s chosen risk level. Plans that hold more shares delivered stronger returns, while Plans holding a higher proportion of bonds dipped.
Our Investment Team continues to actively monitor the financial markets and their impact on your Plan, and as always, we are ready to act in your best interests as and when events unfold.
The figures shown are based on a medium-risk (Confident) investment Plan.
Please remember the value of your investments can go down as well as up, and you could get back less than invested. Past performance is not a reliable indicator of future returns.