Sabco® Investment's Monthly Market Report - August, 2023

Sabco® Investment's Monthly Market Report - August, 2023

In the past month, worldwide stocks dipped by 1.5% when calculated in euros. U.S. markets, experiencing a 0.34% dip, performed better than other global regions. European and emerging market stocks declined by 2.7% and 4.9%, respectively. Both the S&P 500 and Nasdaq marked their first monthly drops since February. Notable sectors seeing the steepest downturns included regional banks, semiconductors, industrial metals, department stores, automotive firms, cruise companies, casinos, and specific pharmaceutical businesses. The 'Magnificent Seven' tech giants, responsible for nearly 75% of the S&P's first-half growth, had varied outcomes. Nvidia, with a 5.6% increase, shone due to a promising earnings report and strong forecasts. Amazon shares grew by 3.2% following a favourable earnings report, especially due to AWS's performance, while Alphabet also saw a 2.6% hike due to advancements in AI. On the flip side, Meta, Apple, Tesla, and Microsoft lagged behind.

Worries surrounding China's economic trajectory contributed to the drop in August's equity. July's data on activity, credit, and inflation missed expectations. Focus remained on the challenges facing China's real estate sector and fluctuating consumer trust. Measures by the Chinese government to kickstart growth mostly underwhelmed, with President Xi resisting demands for more straightforward consumer stimulation. Some earnings announcements negatively impacted investor mood. Apple missed Q1 iPhone sales goals and Q2 sales predictions. Department stores saw a shift in consumer preference towards private labels, harming top US retailers' profits. Other negatives for stocks in August included bank credit downgrades, stricter bank lending, reduced loan demand, the highest mortgage rates since 2001, and increasing fuel prices.

In August, US 10-year government bond values declined. However, long-term bond yields wrapped up the month lower than their peaks during the month. The US two-year yield lingered around 4.85%, while ten-year yields settled at 4.10%, having peaked at 4.34% - a record since 2007. German 10-year yields in the eurozone also closed slightly up by month-end.

Post the July announcements by the Fed and ECB, August remained uneventful. Neither central bank had a meeting. The headline was China's central bank's unexpected decision to slash its primary interest rates, prompted by weak economic data. This decision marked the second rate cut in a three-month span, indicating growing concerns regarding economic stability.

The dollar index rose by 1.7% during the month, offsetting losses from the previous two months. The dollar's ascend against the euro, an increase of 1.4%, was mainly due to the US economy's superior performance relative to the eurozone. Other currencies remained stable in August. Of note was the Russian Central Bank's sudden 3.5% rate hike in mid-August, an attempt to stabilize the ruble, which provided only short-lived relief.

Gold prices, when measured in dollars, decreased by over 2% in August. In contrast, WTI crude oil climbed 2.2%, marking the third consecutive monthly gain. Oil prices were buoyed by production cuts in both Saudi Arabia and Russia. Lastly, industrial metal values dropped by 5% in August, largely influenced by uncertainties surrounding the Chinese economy.