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August Market & Economic Update by Tilney’s Head of Multi-Asset Funds, Ben Seager-Scott

Welcome to our latest market and economic update, which looks back over the month of August 2020.


August was another positive month for risk assets, as global equity markets recorded their hottest returns for the month of August since 1986.

Equity market returns were strong across a number of regions, with fears of a second Covid-19 wave and rising geopolitical risks offset by another weak month for the US dollar and the continuation of accommodative economic policies from central banks and governments around the world. At the company level, technology focused companies continued to be the main driver of returns, as Apple became the first US company to reach the US$2 trillion valuation milestone and Tesla shares charged to a new record high.

The weaker US dollar also supported another solid month for commodity prices, most notably the price of silver, which continued to rally after strong returns in July. The historically more defensive asset classes, such as government bonds, were weaker over the month.


In the latest chart of the month, we highlight the significant drop in quarterly share buybacks from US companies over the second quarter as businesses reacted to volatile trading conditions.

The latest data released in the month highlighted that share buybacks from companies listed in the S&P 500 index have fallen to their lowest quarterly total since Q1 2012, as the uncertain outlook and impact of big banks suspending their repurchase programmes in March took effect.

Amongst the biggest buyers of their own shares over the quarter were reported to be technology giants Apple, Google and Microsoft, alongside a large one-off repurchase by telecoms company T-Mobile US.

Share buybacks have been a notable and somewhat controversial contributor to market performance in recent years, linked to historically low borrowing conditions from global central banks and the impact on valuations.


  • Leading the pack on a total return basis and in local currency terms over the month were US equities again, which rose to fresh highs on continued support from a weak US dollar, accommodative monetary policies from the US Federal Reserve and investor demand for technology focused stocks. In local currency terms, the MSCI USA index returned +7.5% over the month and +5.4% in sterling terms. At the company level, technology focused companies continued to be the main driver of returns, as Apple became the first US company to reach the US$2 trillion valuation milestone and Tesla shares charged to a new record highs in the month.
  • UK equities also produced positive returns for investors over the month, with the latest economic data pointing to a pick-up in economic activity, as retail sales rose and July’s forward looking PMIs were stronger. For a successive month, UK large caps (+1.5%) underperformed UK mid-caps (+5.4%) and smaller companies (+5.5%) on a total return basis. At the sector level, August was a strong month for consumer services, industrials and technology stocks. The more defensive utilities sector was the notable laggard.
  • European equities were also positive performers in August, despite weaker forward looking PMI data and fears that virus cases were rising again on the continent. On a total return basis, the MSCI Europe ex UK index returned +3.1% in local currency terms and +2.2% for sterling investors over the month. At the country level, the export reliant German DAX was notably strong in the month on the gradual pick-up in global economic activity.


  • Asian and Emerging Market equities delivered positive returns for investors again in August, supported by the weaker US dollar and pickup in economic activity. The headline MSCI Asia Pacific excluding Japan and MSCI Emerging Markets indices generated total returns of +3.8% and +2.2% in US dollar terms over the month, and +1.8% and +0.2% respectively in sterling terms.
  • At the individual country level, there were mixed returns in local currency terms, with Brazilian equities the notable laggards over the month linked to its Covid-19 response. Chinese equities were positive over the month despite ongoing geopolitical tensions. The mainland Shanghai Composite index returned +2.7% and Hong Kong’s Hang Seng index returned +2.5% over the month.
  • After lagging in recent months, Japanese equities rallied strongly in August, as investor demand for risk assets in the month outweighed data highlighting a record economic contraction over the second quarter and the resignation of Prime Minister Abe late in the month due to health reasons. The MSCI Japan index returned +7.9% in local currency terms and +5.5% in sterling terms.


  • August was a weaker month for fixed income markets, as yields and spreads rose modestly over the month. Within government bond markets, UK gilts (-3.1%) were notably weaker over the month, as UK government debt rose above £2 trillion for the first time. In local currency terms and on a total return basis, German bunds and US Treasuries were also weaker, both returning -1.2% in August.
  • In local currency terms and on a total return basis, global high yield bonds outperformed investment grade credit in August, reflecting the higher risk appetite and the continued hunt for yield amongst investors. The ICE BofA Global High Yield index returned +1.6% (USD terms) and sterling corporates returned -1.0% over the month.


  • As highlighted already, the US dollar was notably weak again in August, with the greenback index falling to its lowest level in two years, as political tensions continued to rise ahead of November’s presidential election and the US Federal Reserve appearing set to keep rates close to zero.
  • Conversely, the pound was stronger again in August as economic activity continued to pick-up. In sterling terms, the euro returned -0.9%, the Japanese yen returned -2.3% and the US dollar -2.0%.


  • After a strong start to the third quarter, global commodity markets delivered another positive month of returns for investors in August, supported again by the weaker US dollar.
  • The two headline indices, the Bloomberg Commodity and the S&P GSCI, returned +6.8% and +4.6% on a total return basis in US dollar terms over the month. In sterling terms, the returns were +4.7% and +2.5% respectively.
  • At the sector level, there were broad gains over the month, with energy prices rising as US oil inventories declined and demand for energy rose linked to hot weather across the US. August was also another positive month for precious metals, particularly silver, which was towards the top of the performance charts again.


  • The delayed data for UK commercial property returns over the month of July highlighted a return to marginally positive total returns for investors. The latest MSCI UK Property data recorded total returns of +0.1%, with capital values declining -0.3% over the month, while income remained stable at +0.4%.
  • At the sector level, July’s data highlighted outperformance from the industrials sector, marginally positive returns from the offices sector and a slowdown in monthly losses from the retail sector.
  • These returns were ahead of the further lifting of Material Uncertainty Clauses (MUC) linked to the pandemic for certain sectors, which impact property valuations and fund suspensions.


The value of your investments, and the income derived from them, can go down as well as up, and you can get back less than you originally invested. Any indication of past performance or quoted yields is not an indicator of future returns. Before investing in funds, please check the specific risk factors on the key features document or refer to our risk warning notice, as some funds can be high-risk or complex, or can be susceptible to risks particular to the geographical area or industry sector in which they invest. Gold, technology and other focused funds can suffer as the underlying stocks can be more volatile and less liquid. Underlying investments in emerging markets are generally less well regulated than the UK. There is an increased chance of political and economic instability and the market(s) can be less liquid.

The property market can be illiquid; consequently, there can be times when investors will be unable to sell their holdings. Property valuations are subjective and a matter of judgement.

Any research or analysis contained in this document has been undertaken by us for our own use and may be acted on in that connection. The contents of the document are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. The document may include forward-looking statements which are based on our current opinions, expectations and projections. It is provided to you only incidentally, and should not be considered a personal recommendation or advice to invest. Any opinions expressed are subject to change without notice.

Issued by Tilney Investment Management Services Limited (Reg. No: 02830297), which is authorised and regulated by the Financial Conduct Authority. Financial services are provided by Tilney Investment Management Services Limited and other companies in the Group, further details of which are available at
© Tilney Smith & Williamson Ltd 2020

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