GoalsGetter Monthly Commentary August 2024

August was another volatile month, in particular for investors in equity markets. As with July, the month could best be descried as “a month of two halves”. Early in the month global markets were roiled by after a sharp sell-off in Japanese equities and the unwinding of the Japanese Yen carry trade.  Some weak economic data from the previously robust US economy early in the month - for example the July labour market reading - also contributed to the “risk-off” tone for the first week of August.  Sentiment then turned positive as quickly as it had deteriorated on some better economic data and dovish comments from central bankers. Equity markets quickly recovered and most ended the month in positive territory. The gain in global equity markets was the fourth straight month of positive returns after weakness in April. Global and local bonds also posted solid positive returns of around 1% over the month. The MSCI ACWI (NZD Hedged) was up 1.6%, and the majority of equity markets in the developed world posted solid gains, with Japan (-1.2%) and China (-3.5%) being the two exceptions.  The Bloomberg Global Agg Index (NZD Hedged) was up 1.1% for August, slightly ahead of the NZ Composite Bond Index return of 0.9%. The Kiwi dollar rallied strongly over the month, up from below U$0.60 to nearly U$0.625 which was a headwind for unhedged investors. The MSCI ACWI Index (NZD unhedged) was down -2.7% for the month.

Labour market data in the US remained mixed, with US jobless claims (release mid-August) coming in lower than expected, therefore sending an opposite signal to the weak July jobs number (released early August). In the Euro area the annual rate of inflation fell to 2.2% YoY, however manufacturing activity readings remained weak, while the services sector looks a bit healthier and improved slightly from July readings.

As was the case in July, previous laggards led the way in August in terms of sector leadership, and for the second straight month information technology was not the standout sector. Real Estate, a sector very sensitive to interest rates, was the best performer on the back of the prospect of lower rates. The Real Estate and Utilities sector were up 5.4% and 3.9% respectively, while Healthcare posted a 5.4% gain. Three of the more cyclical sectors lagged the broader market, with Energy, Consumer Discretionary and Materials returning -1.0%, 0.6%, and 0.8% respectively.