Global Market Commentary August 2020
September 3, 2020

Global equities continued their climb in August: The MSCI All-Country World Index posted a 6.12% return for the month, besting even the impressive 5.28% return in July. In the U.S., the large-cap S&P 500 Index hit an all-time high and posted its best August performance since 1986, gaining 7.01%. The Nasdaq 100 Index gained 11.05% in August and hit a record high. For the year to date, the three major indexes — the MSCI All-Country World Index, the S&P 500 and the Nasdaq — are all in positive territory, with growth of 4.75%, 8.34% and 38.68% respectively.

Global equities continued their climb in August: The MSCI All-Country World Index posted a 6.12% return for the month, besting even the impressive 5.28% return in July. In the U.S., the large-cap S&P 500 Index hit an all-time high and posted its best August performance since 1986, gaining 7.01%. The Nasdaq 100 Index gained 11.05% in August and hit a record high. For the year to date, the three major indexes — the MSCI All-Country World Index, the S&P 500 and the Nasdaq — are all in positive territory, with growth of 4.75%, 8.34% and 38.68% respectively.

Monthly Returns Table

Source: Bloomberg Pricing Data, as of August 31, 2020

Traditionally, the Fed has had a dual monetary policy mandate of balancing inflation with unemployment. However, in his summer speech at Jackson Hole, Chairman Jerome Powell emphasized the latter as the central bank introduced a significant policy change, reaffirming its plan to keep short-term rates near zero even if inflation exceeds the 2% target. Investors moved confidently toward higher-risk assets, comforted by the updated Fed mission. Bond prices, meanwhile, declined in August for the first time after four straight months of gains: The Bloomberg Barclays US Aggregate Bond Index slipped 0.81%.

In international markets, developed equities rallied 5.14% this month to bring year-to-date returns to -4.61%. Emerging markets gained 2.21% in August to bring 2020 returns into the black at 0.45%. MSCI’s largest “emerging market” country, China, gained 5.60% in August to bring its 2020 year-to-date return to 17.29%. The U.S. dollar, which suffered its worst monthly depreciation in a decade in July, continued to slump in August, falling 1.29% against a basket of international currencies.

Increased volatility is typically negatively correlated with equity market gains, so it was very unusual to see the CBOE/S&P Volatility Index — also called the VIX or “fear gauge” — gain 7.97% in August alongside such strong equity market performance. An increase in options premiums suggests that traders are willing to pay more to insure their portfolios amid a range of uncertainties in the months ahead — a list that includes possible stimulus spending, the U.S. presidential election and the possible introduction of a COVID-19 vaccine.

Following gold’s 10.70% gain in July, its best monthly performance in nearly a decade, the precious metal slipped 0.41% in August. Copper and silver, however, gained 6.03% and 15.39% respectively, hitting all-time highs. Both are viewed as industrial components as well as precious metals. The metals have already drawn considerable safe-haven flows as investors fret about the pandemic’s global economic implications.

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Performance

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Data Source: Bloomberg Pricing Data, as of August 31, 2020.

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