August 2024 Investment Summary

A positive month for the Active range with returns ranging from +0.53%* for Active 5 to +1.11%* for Active 1.
*P Acc share class with data sourced from FE analytics as at 31 August 2024.

August 2024 was a volatile and more modest month for portfolios generally.

Most major equity markets saw gains in August, despite seeing a sharp sell-off at the start of the month as US growth fears coincided with a surge in the Japanese Yen prompting a 12% daily decline in the MSCI Japan Index. The US, European and UK markets led the gains, as the Nasdaq and S&P 500 closed the month back at all-time highs. Utilities led the sector-wise performance while healthcare lagged. The FTSE 100 performed well with cautious optimism for UK markets in the second half of 2024, Stoxx Europe 600 Index performed well attributed to the temporary boost to French services from the 2024 Paris Olympics.

The US Presidential election race between Kamala Harris and Donald Trump remains particularly close, with recent polls showing both candidates tied in key swing states. Government bond prices were higher as the ten-year Treasury yield edged down from 3.99% to 3.91% over the month. The US economy grew 3.0% in the second quarter of 2024 higher than the 2% forecast. The Federal Reserve have signalled their readiness to start cutting interest rates in September, stating ‘The time has come for policy to adjust’ with potential for a larger than usual 0.5% rate cut next month. Cooler economic data had dampened hopes for imminent interest rate cuts, but the Feds announcement means markets are now assigning a 100% probability of a rate cut.

US labour market government data this month showed payrolls increased by 142,000 in August, lower than forecasts but up from the previous month. Despite falling below expectations, the growing activity should help temper fears of a slowing economy and US recession.US retail sales measuring the quantity of goods bought, rose more than expected, while consumer confidence rose to a six-month high in August, as households are more upbeat on the economy and inflation, offsetting concern over July’s weak jobs report. Unemployment data ticked down slightly to 4.2% from 4.3% which was its highest level since October 2021.

Tensions in the Middle East continue as hopes of a US-brokered ceasefire between Israel and Hamas in Gaza continue to fade. Exchanges of fire have intensified in recent weeks, as US President Joe Biden and Vice President Kamala Harris spoke to Israeli Prime Minister Benjamin Netanyahu, stressing the urgency of reaching a deal. Fears over an all-out regional conflict remain. The conflicts impact remains limited on the global economy. Brent Crude prices have been flat falling to $80/barrel from $81/barrel in August.

Central banks are warming to the idea of rate cuts, following data supportive of loosening monetary policy. Investors and central banks continue to focus on key data points on inflation, unemployment and growth that could provide insight into the relative health of economies, while corporate earnings will remain in focus.

WS Prudential Risk Managed Active - Tactical asset allocation activity

Our equity position is currently +1.25%, made up of a diversified basket across the US, UK, Asia and GEM. This is funded from a small Japan and China equity, European credit and cash underweights, with an overweight to US Treasuries and a slight overweight to real estate REITS.