Extract from Redwood Financial’s Economic Review August 2020

(Data compiled by TOMD)

Major benchmarks ended August in positive territory. US stocks hit record highs at the end of the month after Federal Reserve Chairman Jerome Powell outlined the central bank’s inflation control measures and strategy for avoiding future crises at the virtual Jackson Hole Economic Policy Symposium. Powell said that the central bank would launch a new monetary policy framework that will likely see interest rates in the US remain low for longer. European stocks were mixed as markets continued to try and make sense of the historic shift on inflation announced by the Fed.

Global stocks responded positively as renewed optimism about US-China trade tensions surfaced, with US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He reaffirming their commitment to a Phase 1 trade deal on 25 August. In the US, the blue-chip Dow Jones index ended up 7.57% for the month, while the tech orientated NASDAQ returned a 9.59% gain.

In the UK, markets closed for the month on 28 August, with a Bank Holiday on 31 August. The domestically focused FTSE 250 rose 5.05% in the month to close on 17,788.33, the FTSE 100 gained 1.12% in August, to 5,963.57. The index closed its second week lower on 28 August as concerns over a post-pandemic economic rebound presented. The Junior AIM index closed on 964.04, a healthy monthly gain of 8.93%. On European markets, the Euro Stoxx gained 3.09% in the month and in Japan, the Nikkei 225 gained 6.59%. During the month, Japan’s long-serving Prime Minister, Shinzo Abe, announced his intentions to resign due to ill health.

On the foreign exchanges, sterling closed the month at $1.33 against the US dollar. The euro closed at €1.11 against sterling and at $1.19 against the US dollar. Gold is currently trading at around $1,968 a troy ounce, a small loss of 0.39% on the month. Brent Crude is currently trading at around $45.50 per barrel, a gain of 5.11% on the month.

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