Investment

August General Markets Comments

by Pierre Mouton

August General Markets Comments

“Hard to Handle”, Otis Redding, 1968, The Black Crowes, 1990.

Markets are good overall in 2023, but, to paraphrase Otis Redding in his 1968 song (and the Black Crowes in a very good reprise in 1990), they are definitely “hard to handle”. Why is it so? Well, first of all the economy, and especially in the US, has given us its dose of surprises: consensus pointed to a serious slowdown, possibly a recession, following the aggressive rates increases from Central Banks, but this has not materialized yet, and should probably not before at least Q2 2024. Then, the famous China reopening trade (remember, this was THE big thing in November 2022) has turned out to be a damp squib with the Chinese equity market and the renminbi lagging big time (the property market being one of the possible explanations). Then, the consensual view of a fading dollar in 2023 has proven wrong: not only does the broad dollar index (DXY) hold well, more or less flat this year, but two important currencies have slumped versus the greenback, namely the Japanese Yen and the Chinese renminbi (respectively down 10.97% and 5.22%). Finally, style wise, the overall increase in long term bond yields (+60 bps for the US 10 year, +18 bps for the German Bund) should have prevented Growth from performing well; thanks to the hype around Artificial Intelligence, Growth has humiliated Value so far this year (+27.38% for the MSCI World Growth versus a lacklustre +3.07% for its Value counterpart). Yes, hard to handle, indeed.

All equity indices were down in August 2023, barring the Japanese Topix (up 0.4%, but with a weak JPY, down 2.38% versus the dollar): -1.77% for the S&P500, -1.62% for the Nasdaq, -2.79% for the Stoxx 600 and a disastrous -6.36% for the MSCI Emerging Markets. On the fixed income side, Credit was flat, the US 10 year yield added 15bps, while the German 10 year Bund yield receded by 3 bps; this divergence might explain, at least partly, the weak euro (-1.53% versus the USD). Oil rose 2.24% for the WTI, while Gold abandoned 1.27%, here again a strong dollar providing a possible explanation.

 

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS PARTNERS SA provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data or other financial instruments referred to in this general comment. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

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