August is typically a quiet month for markets with the holiday season in full swing and little economic or corporate news-flow to influence investors. But 2020 is not a typical year and global investors remained in ‘risk-on’ mode pushing share prices higher with the global stock market benchmark MSCI World index rising 6% - it’s best August for over 30 years (Source FE Analytics). However, many UK investors may have seen little benefit as the domestic stock market continues to lag global markets and gains in overseas funds have been diluted by the strengthening pound (Source FE Analytics).
Unlike in recent months, it was not just ‘stay at home’ sectors such as technology, consumer staples and healthcare that rallied in August. Some of the best performers in the US stock market included airlines, cruise liners, casinos and hotels, aka ‘reopening stocks’ which will benefit from a recovery in consumer activity. This trend was also evident in the UK market where the Travel and Leisure sector was the top performer (Source JPMorgan).
At the end of August, the world’s most famous investor Warren Buffett celebrated his 90th birthday. His long-time friend Bill Gates described him as still having the mental sharpness of a thirty-year-old (and the diet of a six-year-old due to his love of McDonald's chicken nuggets and coca-cola). Those looking to follow Buffett’s investment strategy (if not his diet) may want to look at opportunities in Japan. Buffett has recently invested $6 billion in large Japanese conglomerates, marking a decisive move away from his favour for US businesses. Japan was in fact the best performing market in August with the TOPIX index rallying over 8% (Source FE Analytics).
The information in this post is not financial advice, it is provided solely to help you make your own investment decisions. If you are unsure about whether an investment is appropriate for you, please seek professional financial advice. You can find more information here.
When you invest you should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future return.